The drop in October hike pricing removes the most immediate threat to leveraged crypto positioning, which helps explain why Bitcoin has defended the low $80,000s despite multidecade highs in Treasury yields. Bonds giving back their post-payrolls gains is the warning sign: the long end is moving on inflation and fiscal concerns, not just the Fed’s next step. Traders are likely to stay range-bound until September CPI clarifies whether the softer jobs data reflects a real cooling in inflation pressure. A hot print would hit leveraged longs first, while a soft one could open room above the late-September high.
—
Softer US data has taken an October Fed hike largely off the table, but with the 10-year yield still above 5%, Bitcoin has swapped one macro headwind for a slower, stickier one.
Summary:
- The Fed raised rates by 25 basis points to 3.75%-4% on September 16, its first hike since July 2023
- October hike odds peaked around 70% to 75% in late September before falling to roughly 20% after weak data
- September payrolls rose just 29,000 against expectations near 90,000, unemployment ticked up to 4.2% and wage growth slowed to 3.0% annually
- August PCE inflation came in below forecasts at 3.4% year on year
- The 10-year Treasury yield hit 5.342% on October 1, its highest since April 2002, and bonds gave back gains after the jobs report
- Bitcoin has held a range of roughly $83,000 to $87,400 since late September, supported by $6.34 billion of Q3 spot ETF inflows
Bitcoin is caught between two different signals from US rates markets, and the gap between them is now one of the most useful things for crypto traders to track. Softer economic data has sharply cut the odds of another Federal Reserve rate hike this month, yet long-dated Treasury yields remain close to their highest levels in more than two decades. Bitcoin traded near $86,000 on October 2, within the range of roughly $83,000 to $87,400 it has held since late September.
The shift in Fed expectations has been fast. The Fed raised its target range by a quarter point to 3.75%-4% on September 16, its first hike since July 2023, and six of 18 policymakers projected at least one more increase this year. By late September, futures implied a 70% to 75% chance of an October move. Since then the data has cooled. The August PCE price index, the Fed’s preferred inflation gauge, came in below expectations at 3.4% year on year. The September jobs report then showed payrolls rising just 29,000 against a consensus near 90,000, with July and August revised down by a combined 60,000 and the unemployment rate edging up to 4.2%. Average hourly earnings rose only 0.1% on the month, leaving annual wage growth at 3.0%, below inflation. CME FedWatch data put the odds of an October hike at about 22.7% after the report, down from 64.2% a week earlier, while a December hike remains priced.
Why this matters for Bitcoin comes down to two separate channels. A Fed hike raises short-term borrowing costs, which feeds directly into the cost of leveraged long positions funded in dollars, so fading October odds remove that near-term pressure. Bitcoin also competes with what investors can earn without risk, and that is set further out the curve. The 10-year yield touched 5.342% on October 1, its highest since April 2002, and bonds gave back gains after the payrolls release even as hike odds fell, a sign that concern over longer-term inflation has not gone away.
That divergence suggests the relief for Bitcoin is partial rather than complete. Lower hike odds ease funding pressure, but long-end yields above 5% keep the opportunity cost of holding a non-yielding asset high. Steady demand through US spot ETFs, which took in $6.34 billion in the third quarter, has helped Bitcoin absorb that pressure so far, although flows alone do not show who is buying or why.
The interpretation would change if long-dated yields keep climbing while Fed hike odds stay low. That would point to a bond market pricing inflation or fiscal risk on its own terms, arguably a tougher backdrop for crypto than a single quarter-point hike. A retreat in long-end yields alongside cooling data would ease both headwinds at once.
What to watch next is a tight sequence of US events. Minutes (preview here) from the September Fed meeting are due on October 7 in Washington, followed by September CPI on October 14 and the Fed decision on October 28 and 29. The October jobs report lands only after that decision. A hot CPI print could revive October hike pricing quickly, so watching both the 10-year yield and Bitcoin’s response to it, rather than hike odds alone, gives the clearer read on whether the macro pressure is building or fading.
This article was written by Eamonn Sheridan at investinglive.com.