Bitcoin fell back around $81,000 after US inflation exceeded expectations, reviving the risk of another rate hike by the Federal Reserve. The simultaneous decline in stocks, copper and bond yields, while gold rises, mainly reveals a general flight to assets deemed safer.
In brief
- Bitcoin falls back to $81,000, driven by a general decline in risky assets.
- Stocks and copper fall, while gold rises and attracts investors.
- US inflation revives fears of another Fed rate hike.
- The decline in bond yields reflects increased demand for safety.
- The $80,000 threshold becomes decisive for bitcoin, with risk of retreat to $75,000.
Bitcoin follows the retreat of risky assets
- Bitcoin traded around $80,700 to $81,000 ;
- S&P 500 futures fell about 0.3% ;
- Nasdaq and Asian tech stocks came under pressure ;
- Copper lost more than 1%, after a 1.6% drop the day before ;
- The US 10-year Treasury yield dropped back near 5.08% ;
- Spot gold gained about 1.3%, above $4,150 per ounce.
The decline in copper provides important information. This metal is often considered an indicator of global economic activity as it is used in construction, electrical networks, and industry. Its decline, along with stocks, suggests investors fear both high rates and slowing growth.
Bitcoin’s movement therefore does not look like a correction exclusively linked to the crypto market. It fits into a broader reduction in exposure to assets sensitive to the economic environment.
Inflation puts a rate hike back on the table
The US consumer price index rose 0.6% in September and 3.7% year-over-year. The market expected an annual increase close to 3.6%. Gasoline prices notably rose 9.1% in one month, but tensions are not limited to the energy sector.
This acceleration heightened fears that the Federal Reserve will keep rates high or carry out another hike. The probability assigned by markets to a rate hike at the October meeting significantly increased after the release of on-chain data.
High rates penalize bitcoin in two ways. They make bonds and money market investments more attractive, reducing the relative interest of assets without guaranteed returns. They also increase the cost of credit and limit liquidity available for speculative investments.
For cryptos, higher rates can reduce investors’ willingness to take risks and increase the relative appeal of yield-bearing instruments.
The market’s initial reaction pushed the US 10-year Treasury yield toward 5.3%. Its subsequent decline around 5.08% does not necessarily mean the risk of rate hikes has disappeared. It rather shows that investors bought bonds to protect themselves against economic deterioration and market declines.
This evolution explains why bitcoin and yields can fall simultaneously. Anticipated rate hikes first weigh on risky assets, then the flight to safety supports bonds, which lowers their yields.
Gold benefits from doubt, unlike bitcoin
Gold rose more than 1% on October 15, supported by the decline in the dollar and bond yields. The precious metal thus fulfills its traditional role as a safe haven, while bitcoin continues to behave mainly as a risky asset.
The $80,000 zone now constitutes the main threshold monitored. A durable break could open the way to a return toward $75,000, according to some analysts. Conversely, stabilization of inflation and a decline in rate hike expectations could allow bitcoin to regain the $85,000 to $88,000 zone.
