Inflation spiked and Bitcoin still didn't move

The Roundup is Rhino’s weekly read for people who'd rather build a process than predict a price.

Bitcoin spent another week at a flat price level. The price hovered around $82,000. Here are three reasons it couldn't get moving:

1. Inflation came in hot, and that's bad for Bitcoin short-term. 

US inflation hit 3.7% last week, the highest since spring and above what most economists expected. Most traders would expect that to be an ideal scenario for Bitcoin to rise, considering it’s been lauded as an inflation hedge for years. 

Not really. In the short term, Bitcoin doesn't trade on the inflation number — it trades on what the Fed does about it. When central banks cut interest rates, borrowing money is cheap, and in that situation Bitcoin tends to fly, but when they tighten and money gets scarce, it struggles. 

A hot inflation print forces the Fed to keep money scarce with traders now putting the odds of another rate hike by December at about 76%.

2. The ETF crowd kept heading for the exit. 

For a second week in a row, spot Bitcoin ETFs saw around $230 million of outflows last week. With the last two weeks combined, Bitcoin ETFs had roughly $900 million dollars in outflows. The big institutional buyers that powered August’s surge aren't just sitting out; they're pulling money off the table.

3. Oil kept the pressure on. 

Crude hit a five-month high on Friday, and energy costs jumped more than 5% on the month. Expensive oil feeds the inflation that keeps the Fed tough.

Still, there’s a catch. 

Add up three real headwinds — hot inflation, fleeing ETF money, rising oil — and Bitcoin still held above $80,000 and is actually up slightly on the month. Everything pushed down this week, and it barely budged. For an asset this twitchy, boring is its own kind of strength.

So what’s next? Well, The Fed decides interest rates on October 28. 

The real case for Bitcoin as a hedge isn't this week's number, it's the long game. We laid the whole thing out, below:

Chat next week,

The Rhino Research team

P.S. If you have Bitcoin in Satsdrop V1, please withdraw it by October 31st, as we're in the process of rolling out Satsdrop V2.