Higher rates hurt bitcoin and risk assets, because when the Fed raises rates, cash and Treasuries start paying a decent, guaranteed return, so investors have less reason to hold something that doesn’t earn a yield and swings 5% in a session.
On the other hand, colder inflation means that the Federal Reserve has less reason to raise, so that attraction weakens and money returns in the opposite direction.
Elsewhere, Brent crude rose 1% to above $85 a barrel, a third straight day of gains, after President Trump threatened new attacks on Iran and the United States resumed its blockade of Iranian shipping through the Strait of Hormuz. Crude oil is now up 11% in two sessions.
Stocks followed suit with cryptocurrencies. The MSCI Asia Pacific gauge rose 2.3%, its biggest gain in a month, with technology stocks leading the way. South Korea’s Kospi rose 8.2%, regaining its position as the world’s best-performing major benchmark index this year, and SK Hynix rose 13% in Seoul after its American depositary receipts rose 27%.
“Bitcoin remains a rate-sensitive risk asset rather than a macro hedge,” said Jeff Ko, chief analyst at CoinEx, who said the print reduces “immediate bearish pressure without generating a lasting breakout.”
Core inflation of 2.6% is still above the Federal Reserve’s 2% target, so the figure gives the central bank room to maintain rather than reasons to cut. Ko pointed to the September FOMC meeting as the next real macro test, along with the direction of the dollar and whether bitcoin ETF flows can sustain themselves.
