Weak US Jobs Data Slashes October Rate Hike Odds but Yields Keep Bitcoin Rangebound

With the odds of an October rate increase falling, the main near-term risk to leveraged crypto positions is gone, a factor that helps account for Bitcoin's ability to hold the low $80,000s despite multi-decade peaks in Treasury yields. The way bonds gave back their post-payrolls advance is a cautionary signal: the long end is moving on inflation and fiscal issues, not merely the Fed's next decision. Market participants are expected to stay range-bound until September CPI figures clarify whether the softer employment numbers represent a genuine easing of inflationary pressure. A hot inflation print would hit leveraged long positions initially, whereas a soft reading could open room above the late-September high.

Milder US economic reports have taken an October Fed rate increase largely off the table, yet with the 10-year yield still above 5%, Bitcoin has exchanged one broad headwind for a slower, stickier one.

Summary:

• On September 16 the Federal Reserve raised its policy rate by 25 basis points to between 3.75% and 4%, the first such move since July 2023
• The chance of an October increase topped 70% to 75% in late September before falling to roughly 20% after weak data
• Employers added only 29,000 jobs in September against a consensus near 90,000; the jobless rate ticked up to 4.2% and annual wage inflation slowed to 3.0%
• August PCE inflation came in below projections at 3.4% year on year
• The yield on the 10-year Treasury hit 5.342% on October 1, its highest since April 2002, and bonds retraced their advance after the employment report
• Bitcoin has stayed within a band of about $83,000 to $87,400 since late September, underpinned by $6.34 billion in spot ETF purchases in the third quarter

Bitcoin is caught between two conflicting messages from US interest-rate markets, and the spread between them has become one of the most valuable signals for crypto traders. Softer economic data has sharply reduced the chance of another Federal Reserve rate rise this month, yet long-term Treasury yields remain close to multi-decade peaks. On October 2, Bitcoin traded at about $86,000, within the band of roughly $83,000 to $87,400 it has occupied since late September.

The shift in Fed expectations has been swift. The Fed increased its target range by a quarter point to 3.75%-4% on September 16, its first hike since July 2023, and six of 18 policymakers projected at least one more increase this year. By late September, futures markets implied a 70% to 75% probability of an October move. Since then, incoming data have been cooler. The August PCE price index, the Fed's preferred inflation gauge, fell short of forecasts at 3.4% year on year. The September payrolls report then showed a gain of only 29,000 jobs against a consensus near 90,000, with combined downward revisions of 60,000 for July and August and the unemployment rate edging up to 4.2%. Average hourly earnings rose just 0.1% on the month, leaving annual wage growth at 3.0%, below inflation. CME FedWatch data put the odds of an October rate increase at about 22.7% after the report, down from 64.2% a week earlier, while a December hike remains priced in.

The relevance for Bitcoin comes down to two distinct channels. A Fed rate increase raises short-term borrowing costs, which directly affect the cost of leveraged positions funded in dollars; thus, the fading October odds eliminate that near-term pressure. Bitcoin also contends with the risk-free return available to investors, which is determined further out on the yield curve. The 10-year yield touched 5.342% on October 1, its highest since April 2002, and bonds surrendered their post-payrolls gains even as hike probabilities fell, a sign that concern over longer-term inflation has not faded.

This divergence suggests Bitcoin's relief is only partial. Lower odds of a rate increase ease funding constraints, but long-end yields above 5% keep the opportunity cost of holding a non-yielding asset high. Steady buying from US spot ETFs, which took in $6.34 billion in the third quarter, has helped Bitcoin absorb that pressure so far, though the flows alone do not reveal buyer identities or motives.

The reading would change if long-dated yields continue to climb while Fed hike odds stay low. That would point to a bond market pricing inflation or fiscal risk on its own terms, arguably a more challenging environment for crypto than a single quarter-point increase. A retreat in long-end yields alongside cooling data would relieve both headwinds simultaneously.

The next items to watch are a tight sequence of US events. Minutes (preview here) from the September Fed meeting are due on October 7 in Washington, followed by September CPI on October 14 and the Fed's decision on October 28 and 29. The October jobs report will be released only after that decision. A hot CPI reading could quickly revive expectations of an October rate increase, so tracking both the 10-year yield and Bitcoin's reaction to it, rather than just hike probabilities, gives the clearer read on whether macro pressure is building or fading.