Higher rates hurt bitcoin and risk assets because when the Fed raises rates, cash and Treasuries start to offer a decent, guaranteed return, so investors have less reason to hold something that pays no return and swings 5% in a session.
On the other hand, lower inflation means the Fed has less incentive to raise rates, so the pull weakens and money flows back the other way.
Elsewhere, Brent crude rose 1% to above $85 a barrel, a third straight day of gains, after President Trump threatened new strikes against Iran and the United States resumed its blockade of Iranian shipping through the Strait of Hormuz. Crude has now jumped 11% in two sessions.
Stocks followed the same pattern as cryptocurrencies. The MSCI Asia-Pacific index rose 2.3%, its biggest gain in a month, with technology stocks leading the way. South Korea’s Kospi jumped 8.2%, regaining its position as the world’s best-performing major this year, and SK Hynix rose 13% in Seoul after its American depositary receipts jumped 27%.
“Bitcoin remains a rate-sensitive risk asset rather than a macro hedge,” said Jeff Ko, chief analyst at CoinEx, who said the print reduced “”immediate downside pressure without building a lasting breakout.
Core inflation, at 2.6%, remains above the Fed’s 2% target, giving the central bank room to maneuver rather than a reason to cut rates. Ko highlighted the September FOMC meeting as the next real macroeconomic test, as well as the direction of the dollar and whether Bitcoin ETF flows can sustain.
