Bitcoin Rally Stalls at $85,500 as Treasury Yields Remain Elevated

Bitcoin traded just above $83,700 during Thursday's Asian morning hours, retreating from a brief peak of $85,500 reached on Wednesday. The initial move higher was triggered by a softer-than-expected U.S. PCE inflation report, which showed prices up 3.4% annually and 3.0% excluding food and energy.

Dan Khus, chief analyst at LVRG Research, noted that the inflation data reduced expectations for a Federal Reserve rate hike in October, shifting focus toward December. According to Khus, crypto markets initially treated the print as a relief signal, prompting investors to increase their appetite for risk assets.

However, the rally lost momentum as Treasury yields remained near their highest levels since 2002. The 10-year Treasury yield hovered around 5.28%, while the 30-year yield stayed close to its recent peak. These elevated yields ultimately erased much of the gains across the crypto market.

Among other major assets, HYPE rose 3% to approximately $89, and DOGE gained nearly 2% to trade just under 10 cents. Ether, BNB, TRX, and ZEC each saw modest gains of less than 1%. XRP remained flat at $1.50, while SOL lagged behind, slipping nearly 1% to just under $119.

Broader market sentiment was supported by tech stocks, with Nasdaq 100 futures climbing 0.8% and S&P 500 futures rising 0.4%. Gains in Asian markets, including a 2.7% jump in Japan's Nikkei, followed an upbeat forecast from Micron Technology.

Despite the cooling inflation data, analysts suggest that a sustained decline in the 10-year Treasury yield is necessary to provide the room for a more durable rally in bitcoin.