PCE Data Sparks Rate Hike Odds Repricing, Sends Bitcoin Soaring

Bitcoin surged to $85,598 on September 30 as traders reassessed their expectations of another Federal Reserve rate hike in October. The move followed the release of August's Personal Consumption Expenditures data, which showed core PCE rose 3.0% year-over-year, beating forecasts of 3.7%. This was seen as a sign that inflation may not be as high as previously thought.

NY Fed President John Williams also weighed in on September 29, stating there was 'no need for urgency' on future rate increases. Combined with the PCE data, this caused a sharp repricing of rate hike odds, which fell from above 70% to around 37%. Bitcoin's price reflected this shift, closing the month with a 7% gain and marking its first positive September since 2013.

Bitcoin's third-quarter return exceeded 40%, despite Treasury yields sitting above 5.2%. This suggests that investors are still allocating capital towards cryptocurrency, even in a high-interest-rate environment. Grayscale's Zach Pandl described the Fed's rate hike as a 'mid-cycle adjustment', which supports this view.