The odds of a 25-basis-point Federal Reserve rate hike in October jumped to 27.7% at the time of writing, up from 17.7% a week ago, according to the CME FedWatch tool. This represents a dramatic increase from just 17% a week ago, as reported by CME FedWatch. The shift came after the September consumer price index rose 3.7% year over year, above the 3.6% consensus and August's 3.4%, as reported by the October 15 market report. Core inflation also exceeded expectations, increasing 0.3% month over month against a 0.2% forecast and 2.6% annually against 2.5% expected, with gasoline prices rising 9.1% on the month. The December rate hike odds currently sit at around 65%, indicating that an October hold could mean delay rather than a change in the market's expectation of further tightening. The Federal Reserve had raised its target range to 3.75%-4% in September, its first increase since 2023, with the next meeting scheduled for October 27-28. As reported by CoinDesk, the October meeting is not marked as one of the scheduled quarterly projection meetings, so investors should not assume it will include a new dot plot.
Bitcoin recovered above $82,000 on Thursday after experiencing a brief dip below $80,000, with the cryptocurrency dropping as low as $79,694 during intraday trading. According to Coinglass data, the recovery erased most of the losses that followed the release of hotter-than-expected U.S. inflation data, which had sent Bitcoin tumbling from $84,000 to $82,700. Mounting selling pressure on Wednesday drove Bitcoin below its $82,000 support level, with the price dropping to under $80,200 near midnight as investors digested the inflation report. Over the next six hours, Bitcoin traded in a range between $80,500 and $81,500 during a tight tug-of-war between bulls and bears. Shortly before 4 a.m. ET, a second wave of selling drove the price to the intraday low of $79,694, but the rebound was swift with Bitcoin rallying to $82,520 before consolidating above $82,000 by 1:00 p.m. Despite the extreme volatility, Bitcoin was only marginally higher than it was 24 hours earlier, leaving its market capitalization almost unchanged at just under $1.65 trillion. As reported by CoinDesk, Bitcoin traded near $81,500 on October 17, having recovered from a move below $80,000 during the week, with the cryptocurrency showing a 24-hour change near negative 0.7% when checked for this article.
The macro repricing had a direct impact on crypto markets, with volatile trading wiping out over $777 million in long crypto positions according to Coinglass data. Bitcoin fell below $82,000 following the hotter-than-expected inflation data, with the cryptocurrency dropping as low as $79,600 on Thursday, moving further away from the key threshold that acted as both resistance and support in the past. Ethereum dropped about 7.25% over the last 7 days, while Ripple's XRP declined 6.73%. The broader crypto market also experienced significant declines, with Solana (SOL) and Zcash (ZEC) posting losses that exceeded 10%. Spot Bitcoin ETF funds saw $261 million of outflows on Wednesday, reversing $175 million of inflows a day prior, as reported by Coinglass. According to CoinDesk, U.S. spot Bitcoin funds lost a net $614.7 million across October's first 12 trading sessions, based on Farside's daily totals. The October 7 fund outflow reached $484.9 million, the largest daily exit since June at the time, followed by $261.4 million on October 14. Positive days totaled $613.3 million while negative days totaled $1.228 billion after rounding the entries, with October 7 alone accounting for approximately 79% of the net withdrawal figure.
Bitcoin's funding rates on Binance fell to -0.0073%, reported crypto analyst Darkfost, revealing that a majority of market participants were positioned bearishly. According to AMBCrypto, the last time this happened was in June, when Bitcoin's price was around $62K. The negative funding rates, combined with rising rate hike odds, contributed to Bitcoin's correction towards $80K. However, the 24-hour growth in Open Interest, denominated in BTC, rose from -3.0% to 4.6%, indicating that more market participants were willing to use leverage despite the bearish sentiment. Across all exchanges, the funding rates had been slightly positive during the price drop, highlighting the risk for long positions if the price continues to fall. As reported by CoinDesk, CoinGlass displayed roughly $52.4 billion of Bitcoin futures open interest and about $77 million of Bitcoin liquidations over 24 hours when checked on October 17. The October selloff showed how forced unwinds can speed a move, with long liquidations causing exchanges to close positions according to their margin rules, creating market orders in a falling market.
Bitcoin enters November near $82,000 after the October 28 Federal Reserve decision will help determine whether the recovery survives. According to CoinDesk, the Fed meets October 27 and 28, followed by a press conference at 2:30 p.m. Eastern time, with the October meeting not marked as one of the scheduled quarterly projection meetings. November will bring new evidence with the October employment report on November 6 and October CPI for November 10. A move from $82,000 to $90,000 requires a 9.8% gain, while a drop to $75,000 would be an 8.5% loss. The September U.S. inflation reached 3.7% annually, up from 3.4% in August, with headline consumer prices rising 0.6% during September while core prices rose 0.3% excluding food and energy. Gasoline accounted for more than half of the monthly increase in the headline index, according to the BLS. The September meeting minutes showed most participants considered another increase likely by year end, while the September median projected policy rate at the end of 2026 was 4.1%, according to the Fed's projection tables. As reported by CoinDesk, the Delta Growth Rate metric has shown signs of improving in recent weeks, with the metric combining market cap and realized cap growth to measure Bitcoin's price accumulation and onchain value accumulation, having been negative all year but pushing higher recently to signal improving market dynamics.
