Bitcoin Hits Roadblock at $85,600 Amid PCE Inflation Data Disappointment

Bitcoin's latest rally stalled at $85,600 after US inflation data came in lower than expected. The Personal Consumption Expenditures (PCE) price index rose 3.4% year-on-year in August, missing forecasts of 3.7%. However, methodology changes introduced by the Bureau of Economic Analysis (BEA) could reduce core PCE inflation by up to 20 basis points.

As a result, Bitcoin's price and open interest diverged. $BTC-denominated open interest fell almost 20% while its price rose 35% from its August low, according to Glassnode. This puts open interest at its lowest since March, potentially making the rally less susceptible to leverage flushes.

The market reaction was muted, with the S&P 500 closing down 0.25% and the Dow Jones Industrial Average shedding 0.86%. The CME FedWatch Tool showed that markets put the probability of a quarter-percentage-point rate increase at the Fed's October meeting at around 37%, little changed on the day.