Cryptocurrency Digest: The Market Between Soft Inflation and Tight Fed Policy

This cryptocurrency digest is dedicated to the contradictory situation in the market: inflation data in the U.S. came out better than expected, but the labor market remains strong, which means the Fed has grounds for a tight monetary policy.

The Fear and Greed Index has dropped to 67 points but still remains in the greed zone. A week earlier, the indicator was at 72 points.

Bitcoin's dominance holds at 59%, indicating a high concentration of the market around the first cryptocurrency.

The cost of mining Bitcoin is estimated at $85,000, which is 1% higher than the current market price.

Inflows into spot cryptocurrency ETFs remained positive but have significantly decreased. Over the week, they amounted to $0.55 billion compared to $4.1 billion the previous week. September marked the third consecutive month of growth for cryptocurrency fund assets after a long period of outflows and a market correction that began in October 2026. Over the past week, Bitcoin traded without a clear direction near $84,000.

U.S.: Inflation Slows Down, But Labor Market Remains Strong

The main driver for the crypto market remains macroeconomics. In August, inflation in the U.S. stabilized at 3.4% year-on-year, which matched analysts' expectations. The consumer price index rose by 0.4% for the month, largely due to rising gasoline prices.

At the same time, core inflation, excluding food and energy, decreased to 2.4% year-on-year. This is the lowest level since spring 2021. The Personal Consumption Expenditures (PCE) index, which is a key benchmark for the Fed, increased by 0.3% from the previous month in August, against a forecast of 0.4%. The core annual PCE was recorded at 3.0%.

The labor market also shows no signs of sharp cooling. According to the August report, the number of non-farm jobs in the U.S. increased by 162,000. Consensus forecasts for September suggest an increase of about 90,000 jobs with unemployment at 4.1%. The ADP leading indicator showed an increase in private sector employment of 90,000 in September, while 70,000 was expected. Initial jobless claims fell to 197,000.

For cryptocurrencies, such statistics appear ambiguous. On one hand, inflation is gradually stabilizing even amid high oil prices. On the other hand, it is still above the Fed's target level of 2%, and a resilient labor market allows the regulator to maintain a tighter course.

According to FedWatch, the probability that the current rate will remain until the end of 2026 is only 13%. Meanwhile, the market assesses the chance of a 25 basis point rate hike at 56%, and a 50 basis point hike at 31%. By the end of 2027, the probability of raising the rate to a range of 4.5-5% is estimated at 55%. In other words, investors are already pricing in further tightening of the Fed's policy.

Bond Yields Rise and Pressure Risk Assets

Expectations of rate hikes continue to impact the U.S. Treasury bond market. The yield on one-year securities has already tested 4.55%, ten-year bonds are trading with a yield of 5.3%, and issues with maturities over 20 years yield more than 5.7%.

During the decline of the debt market in the fall of 2023, yields on long-term U.S. securities approached 5.4% but did not reach 5.7%. Such levels for twenty-year bonds have not been seen since the dot-com crash in 2001-2002.

The rise in risk-free yields makes risky assets, which lack stable cash flows, less appealing. This primarily concerns cryptocurrencies. However, there is a counterpoint to the situation: the ambiguous effectiveness of the U.S. Treasury's buyback of old bond issues increases distrust in U.S. government debt and fiat currencies. This factor, on the contrary, works in favor of the crypto market.

Major Holders Continue to Accumulate Cryptocurrency

Despite the challenging macroeconomic backdrop, major market participants continue to increase their Bitcoin reserves. Since the beginning of August, cryptocurrency treasury companies DAT have purchased nearly 12,000 BTC, bringing their total position to 1,273,456 BTC.

A significant portion of the purchases comes from Strategy, the largest corporate holder of Bitcoin. The company reported acquiring 1,670 BTC on September 28. Its total reserves have grown to 847,665 BTC. Over the past two months, Strategy has increased its position by 3,888 BTC and has bought around 7,220 BTC since August 30 after a series of four sales totaling 6,920 BTC from June 30 to August 10.

Bitmine Immersion Technologies, the largest corporate holder of Ethereum, has also increased its reserves. The company acquired an additional 17,362 ETH, bringing its position to over 6 million ETH. It now holds 4.97% of the total Ethereum supply.

The return of major corporate buyers supports the market and further reduces the amount of cryptocurrency available on exchanges. This increases volatility: relatively large purchases or expirations of cryptocurrency futures can drive prices up more significantly.

Summary: The Market Grows Despite a Challenging Background

The cryptocurrency market presents a contradictory picture. The macroeconomic conditions do not currently appear favorable for a sustainable bullish trend. However, technical indicators suggest that the minimum of the current cycle may have been reached in the summer when Bitcoin was around $60,000.

The very fact that the market is growing in an unfavorable macro environment supports this scenario. Positive inflows into spot cryptocurrency ETFs and the resumption of purchases by DAT support prices and reduce the available supply.

At the same time, high oil prices and a strong labor market force the U.S. Federal Reserve to maintain a tight monetary policy and raise rates, despite rising bond yields. Simultaneously, the weakness of the debt market increases distrust in fiat currencies and encourages some investors to increase their cryptocurrency holdings in their portfolios.