Bitcoin topped $85,000 on Wednesday after U.S. inflation data came in cooler than anticipated, sending Treasury yields lower and giving risk assets a boost after several days of subdued sentiment.
The flagship cryptocurrency was 2% higher at $85,354 in afternoon London trade, reacting positively to the latest core PCE price index data. The Federal Reserve's preferred inflation gauge showed a significant slowdown in price increases over the 12 months through August.
The PCE index rose 3.4% over the past year, slowing from 3.7% in July. August's reading showed a 0.3% increase month-on-month. Cryptocurrencies had been under pressure in recent days, as Treasury yields at multiyear highs had strengthened the dollar, making assets such as gold and cryptocurrencies less attractive for investors.
A softer-than-expected inflation reading tends to temper investor expectations for further interest-rate hikes, boosting risk assets. Fed speeches have also helped ease concerns. New York Fed President John Williams said Tuesday that the central bank could wait until December before raising interest rates again.
Even so, the trend of bitcoin is that the heralded return of the bull market is already in trouble, analysts with data platform CryptoQuant said in a note. "The rally is running out of steam," they said, adding that profit-taking is being seen in the short term.
Bitcoin ETF flows are off to a slower start this week after last week's record haul. J.P. Morgan estimated $56 million of net sales on Monday across the major cryptocurrency exchange-traded products, after last week clocked the biggest inflows recorded all year, at over $3.2 billion.
While bitcoin is struggling to make its next move up after August's comeback, it is still trading at much stronger levels than over the summer, when it languished in the $60,000 zone. The digital currency is on pace for its best quarterly performance since the fourth quarter of 2024, when it rose 47%.