Bitcoin’s rally toward $85,500 following a weaker-than-expected U.S. inflation report failed to hold as Treasury yields remained near multi-decade highs.

BTC was trading above $83,700 during Thursday’s Asian session, up 0.4%. The cryptocurrency had briefly climbed above $85,000 on Wednesday after the August PCE figures came in below expectations, but the gains faded as bond yields remained elevated.

Among major cryptocurrencies, HYPE posted the largest gain, rising 3% to about $89. DOGE advanced nearly 2% to just below $0.10. Ether, BNB, TRX and ZEC each increased by less than 1%, while XRP remained flat around $1.50. SOL declined nearly 1% to just under $119, according to CoinDesk data.

PCE Reading Eases Pressure on Fed Outlook

August’s personal consumption expenditures data pointed to a slower pace of inflation than economists had expected. Headline prices increased 3.4% from a year earlier, while the core measure excluding food and energy rose 3.0%.

Dan Khus, chief analyst at LVRG Research, said the figures reduced the likelihood of another Federal Reserve rate increase in October and made a December move appear more likely.

“August’s PCE report showed inflation cooling more than expected, with prices up 3.4% from a year earlier and 3.0% excluding food and energy, which has reduced the odds of another Federal Reserve rate increase in October and made December look like the more likely next move,” Khus said in an email to CoinDesk.

The softer inflation print initially encouraged investors to add risk exposure, sending bitcoin back above $85,000.

“Crypto markets took that as a relief signal, and bitcoin jumped back above $85,000 as bond yields slipped and investors became more willing to buy risk assets again,” Khus added.

Treasury Market Reasserts Influence

Bitcoin’s advance weakened during late U.S. trading as Treasury yields climbed or remained close to recent peaks.

The 10-year yield hovered around 5.28%, near Wednesday’s high. The 30-year Treasury yield steadied around 5.62% after reaching its highest level since 2002 in New York trading.

Lower oil prices helped slow the bond selloff, while the dollar gained ground.

Equity futures remained positive heading into Asian trading. Nasdaq 100 futures rose 0.8%, while S&P 500 futures added 0.4%. Japan’s Nikkei jumped 2.7% and South Korea’s Kospi gained 1.2% after Micron Technology delivered an upbeat forecast that supported semiconductor shares.

Alphabet rose 1.5% in extended trading following Google’s rollout of Gemini 4 Argon, its new flagship AI model.

Bitcoin’s Next Move Hinges on Yields

The latest price action shows that a favorable inflation report alone has not been enough to keep bitcoin above $85,000.

BTC’s initial move higher came as Treasury yields eased, but the rally weakened once the 10-year yield returned toward 5.3%.

A sustained decline in the 10-year Treasury yield would provide a more supportive backdrop for bitcoin and could help the cryptocurrency maintain gains above $85,000.