Bitcoin: Can Cooler PCE Ease the Fed Headwind?

Bitcoin briefly spiked to $85,000 before easing back to current levels around $83.6K after the Federal Reserve’s preferred gauge for inflation came in cooler than expected.

Core PCE inflation remained unchanged at 3% year-on-year in August, in line with July and below expectations of 3.3%. On a monthly basis, core PCE climbed 0.2% in August, up from 0.1% in July but below the 0.3% forecast.

The data also showed that U.S. consumer spending jumped by the most in more than a year despite elevated prices.

Inflation-adjusted personal spending rose 0.6% in August from a month earlier, the biggest increase since March 2025. U.S. GDP was also revised higher to 2.2% annualised, up from the previous estimate of 1.5%.

The upward revision came as consumer spending, which accounts for more than two-thirds of the economy, grew at a 3.8% annualised rate last quarter, up from the previously reported 3.4%.

Following the data, markets reined in Federal Reserve rate hike expectations, with the probability of a 25-basis-point hike in October falling to just 37%, down from 70% 48 hours ago.

Weaker job vacancies and a drop in consumer confidence had already pulled rate hike expectations lower yesterday, as did comments from New York Fed President John Williams.

Strong Growth and Elevated Yields Remain a Headwind

However, Treasury yields remain elevated following the data and continue to create a headwind for BTC.

The 10-year Treasury yield is trading around 5.26%, close to its highest level in two decades, while the five-year yield has climbed above 5%.

Higher yields can reduce demand for riskier assets as investors have greater incentives to allocate capital towards bonds. This suggests that the recent rise in yields is being driven by economic activity as well as inflation concerns, with inflation still above the Fed’s 2% target.

The key question for Bitcoin is therefore whether cooler inflation can outweigh resilient economic growth and elevated yields.

Jobs Data Could Decide the Next Move

Attention will now turn to September’s non-farm payroll report, due to be released on Friday and representing the next major data point for the Federal Reserve.

Expectations are for 100,000 jobs to be added, following 162,000 jobs in August.

Strong job growth could revive Fed rate hike expectations, pushing yields higher and putting renewed pressure on Bitcoin.

Conversely, weaker-than-expected payrolls, following today’s cooler-than-forecast inflation figures, could see markets price out an October hike further, potentially helping Bitcoin move towards $90K.

While the immediate macroeconomic backdrop is limiting Bitcoin’s upside in the near term, the picture is being supported by robust institutional demand.

Bitcoin ETF Demand Remains Strong

BTC ETFs have recorded net inflows for eight consecutive days.

Net inflows last week topped $2.39 billion, the largest weekly inflow since October 2025, when Bitcoin was trading around record highs.

Persistent ETF inflows provide an important counterweight to elevated yields and could provide the demand needed for BTC to push towards $90K if macroeconomic conditions become more supportive.

For Bitcoin to sustain the move towards $90K, ETF demand will likely need to absorb the selling pressure created by elevated yields and profit-taking while macro data continues to reduce expectations for further Fed tightening.

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