Higher rates hurt bitcoin and risk assets as when the Fed raises rates, cash and Treasury bonds start paying a decent, guaranteed return, so investors have less reason to hold something that pays no yield and swings 5% in a session.
On the other hand, cooler inflation means the Fed has less reason to raise, so that pull weakens and money flows back the other way.
Elsewhere, brent crude advanced 1% to above $85 a barrel, a third consecutive day of gains, after President Trump threatened further strikes on Iran and the U.S. resumed its blockade of Iranian shipping through the Strait of Hormuz. Crude has now surged 11% in two sessions.
Equities took the same cue as crypto. MSCI’s Asia Pacific gauge climbed 2.3%, its biggest advance in a month, with technology shares leading. South Korea’s Kospi jumped 8.2%, retaking its position as the world’s best-performing major benchmark this year, and SK Hynix rose 13% in Seoul after its American depositary receipts surged 27%.
“Bitcoin remains a rate-sensitive risk asset rather than a macro hedge,” said Jeff Ko, chief analyst at CoinEx, who said the print as reducing ‘“immediate downside pressure without building a durable breakout.”
Core inflation at 2.6% is still above the Fed’s 2% target, so the print buys the central bank room to hold rather than reason 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.