Bitcoin Holds Near $82,000 as Fed Officials Cool October Hike Bets

Bitcoin was trading at about $82,060 on Friday morning in Asia, up 0.7% over 24 hours and roughly flat over the past week, according to Coinmarketcap. It traded between about $79,800 and $82,500 over the past day and remains roughly 35% below its all-time high of $126,080. Ether rose 1.1% to about $2,436, and the total crypto market capitalization stood at $2.86 trillion.

The recovery followed a sell-off on Wednesday, when U.S. consumer price data showed headline inflation rising to 3.7% year over year in September and core inflation to 2.6%, both a tenth above forecasts. Bitcoin briefly slipped below $82,000 after the release as traders priced higher odds of a second consecutive Federal Reserve rate hike at the Oct. 27-28 meeting, following September's quarter-point increase to a target range of 3.75% to 4%.

Those bets eased on Thursday. Fed Governor Michelle Bowman said the central bank had time after its September hike to watch how markets and the economy respond before deciding whether more action is needed, while San Francisco Fed President Mary Daly said another increase would likely be needed but that there was "no urgency to act." Following the remarks, the probability of an October hike implied by fed funds futures fell to 32% from 54%, according to the CME FedWatch tool, although markets still price a roughly 90% chance of a hike by the December meeting. The 10-year Treasury yield fell to about 5.08%, its lowest since Sept. 25.

Institutional demand remains soft. U.S. spot bitcoin ETFs recorded net outflows of $261.4 million on Wednesday, the day of the CPI release, after inflows of $175.7 million on Tuesday, according to Farside Investors. Preliminary data showed a further $7.6 million of net outflows on Thursday. BlackRock's IBIT has swung between inflows and outflows over the past week, and the products have now recorded outflows on five of the last seven trading days.

The macro picture continues to drive crypto prices. Gasoline accounted for more than half of September's monthly increase in consumer prices, and the rebound in core inflation suggests energy costs are starting to pass through to services. A Fed that raises rates again would keep pressure on risk assets, while a pause in October would give bitcoin room to retest the $84,000 level it reached earlier this week. With October CPI not due until Nov. 10, Fed commentary and oil prices are the main data points to watch before the meeting.