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BREAKING: U.S. September CPI comes in hot, sending bitcoin sharply lower

America's petrol bill briefly doubled the odds of a Fed rate hike this month.

US consumer prices rose 3.7% in the year to September, up from 3.4% in August and a touch above the 3.6% economists expected.

Petrol prices jumped 9.1% in September alone, accounting for more than half of the month's increase.

Bitcoin dropped about $1,000 on the report and slid under $82,000, hours after climbing toward $84,000 on comments from New York Fed president John Williams.

The Fed can look past a petrol spike, which is why it watches core inflation (the same basket minus food and energy) more closely.

Core came in hot too, up 0.3% in the month against 0.2% expected, and 2.6% over the year against 2.5%.

With core running above forecast, the Fed can't write this one off as an oil shock.

A hot core reading in August is what set up September's hike, the Fed's first since 2023.

Traders pushed the odds of another at the October 28 meeting to around half, up from about 22% before the report, according to CME FedWatch.

They've since cooled to under a third.

Yields on two-year Treasury notes, the bond market's best read on where the Fed goes next, rose 13 basis points to 4.92%.

Not everyone expects the Fed to move this month, though…

Econoday's Theresa Sheehan thinks it holds on October 28, pointing to soft hiring in September's jobs report.

Markets had pencilled the next hike in for December, and Williams said on Tuesday that one more this year may be appropriate.

Petrol's still doing most of the damage to the headline number, but the Fed hikes on core, which makes a tenth of a point there matter more for Bitcoin than a 9% jump at the pump. 🚀

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Matt Hougan has an answer for everyone asking him what happens to Bitcoin if the Fed gets it wrong.

Hougan is the Chief Investment Officer of Bitwise Asset Management and one of the sharpest voices on crypto ETFs and institutional adoption.

Here's what he posted:

The link goes to his latest Bitwise CIO memo, built around the Choose Your Own Adventure books he read as a kid, where some choices led to the same page whichever way you went.

He walks Bitcoin down three paths for AI and the economy.

If AI delivers superabundance, anything built on brainpower gets cheap and value moves to what can't be copied, like waterfront land, gold and Bitcoin.

If the AI bubble bursts, Bitcoin sells off with everything else at first, then rallies once rate cuts and a bailout arrive, and he puts the odds of that bailout at nearly 100%.

And if we muddle along at about 3% growth, he expects more ETF flows, more advisers and more company and government balance sheets buying.

The Fed gets the same test, and it's a live one after this week's hot inflation report.

A hike that tips us into recession brings a rescue, holding while inflation runs hot sends investors hunting for a store of value, and a soft landing keeps the slow climb going.

He's upfront about the detours, though… in March 2020 Bitcoin lost half its value in days before rising about 20-fold.

The thesis could also break outright, and he names three ways: quantum computing, a coordinated global crackdown, or Western governments going back to sound money.

On his reading, owning Bitcoin takes less skill at calling the Fed than stomach for the rough chapters.

Hike, hold or cut, Hougan expects Bitcoin to end up higher. 📖

Time for a check in on Ethereum's supply side dynamics.

To do that we'll be focusing on the amount of Ethereum currently being staked.

Quick Note: Ethereum staking involves locking up ETH to support the blockchain's security. In return, users earn rewards for staking.

44.28 million ETH is now locked in staking, up from 43.86 million two weeks ago.

That's another record, and the first time the total has topped 44 million.

The pace eased, with about 421,000 ETH added this fortnight against 525,000 the period before.

It's the smallest fortnightly gain of the last five, after 740,000, 550,000, 482,000 and 525,000.

That works out to roughly 30,000 ETH a day heading into lock-up, down from 37,500.

Less ETH went into staking this fortnight, but the total still hasn't had a down fortnight in this run. 🔒️

Coinbase, which holds 5% of all bitcoin, wants the quantum fix started now. Coinbase argues Bitcoin's migration could take years, citing Google researchers who see a key-breaking quantum computer possible by 2029.

Patrick Witt exits White House crypto role as Clarity Act stalls. Witt led the administration's push for the CLARITY Act, which failed an initial Senate procedural vote last month.

Standard Chartered Opens Bitcoin and Ethereum Trading to Wealthy UAE Clients. Under Dubai VARA approval, eligible professional investors can buy BTC and ETH from their bank accounts, with the bank holding custody.

EU authority classifies Circle’s USDC as ‘significant’ under MiCA. The European Banking Authority and France's ACPR will jointly supervise USDC, the second-largest stablecoin at $73 billion.

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Select your answer below and you’ll be redirected to the results page. (answer explanation can be found after “Meme Corner”)

Because what would the crypto world be without its share of memes?

Trivia Answer: It moved signature data out of the main transaction record 🥳

Segregated Witness split the signature ("witness") data from the rest of each transaction, freeing up block space and fixing a bug called transaction malleability. That fix helped clear the way for the Lightning Network.

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