Bitcoin’s post-PCE rally quickly lost momentum Wednesday, with the cryptocurrency retreating toward $84,000 after briefly climbing more than 2% and breaking above $85,500.

The move came after August core PCE inflation rose 0.2% month over month, below the 0.3% forecast. On an annual basis, core PCE increased 3%, compared with economists’ expectation of 3.3%.

BTC initially surged as traders reacted to the softer inflation reading, pushing the price above $85,500. The gain was almost completely erased within two hours, however, sending bitcoin back near its pre-data level around $84,000. The rally also triggered liquidations of leveraged short positions.

U.S. equities showed less of a reversal. The Nasdaq gained more than 1% to reach its session high, while Treasury yields edged lower.

Chicago PMI jumps

Separate data showed the Chicago PMI rising to 58.8 in September from 47.1 in August. The reading also came in well above the 51.2 forecast.

About 90 minutes after the initial PCE reaction, markets surrendered part of their immediate gains.

The 10-year Treasury yield was down 1.2 basis points at 5.248%, while bitcoin traded near $84,550, roughly $1,000 below its post-PCE peak.

Fed hike expectations fall

Markets had already reduced expectations for an October rate increase after New York Fed President John Williams delivered a dovish speech.

CME FedWatch data showed the probability of a hike at the Federal Reserve’s Oct. 28 meeting falling to 47.1%, compared with 70% roughly 48 hours earlier.

The Bureau of Labor Statistics also revised its methodology for calculating certain PCE components. The change may have played a role in the softer inflation reading, according to some market observers.

PCE cools as Treasury yields decline

Bitcoin was up about 1% at $84,750 after the PCE data was released.

The 10-year Treasury yield fell 4.2 basis points to 5.218%, while the two-year yield declined 2.1 basis points to 4.868%. U.S. stock futures rose about 0.4%.

Headline PCE inflation increased 0.3% in August, accelerating from 0.1% in July but remaining below the 0.4% forecast. The annual rate held at 3.4%, unchanged from July and below the 3.7% estimate.

Core PCE rose 0.2% from July, while the annual rate reached 3%. Economists had expected monthly and annual increases of 0.3% and 3.3%, respectively.

ADP hiring beats estimates

Private-sector employment increased by 90,000 in September, according to ADP, compared with 36,000 in August and economists’ forecast of 70,000.

Investors were awaiting the official U.S. government employment report due Friday for additional clues about the labor market and the Fed’s rate path.

Real Treasury yields remain a bitcoin headwind

Bitfinex analysts said inflation-adjusted Treasury yields remain one of the key challenges for bitcoin.

The 10-year real yield rose to 2.83% from 2.68% in the week through Sept. 25. A real Treasury return approaching 3% increases the opportunity cost of holding assets such as bitcoin and gold, which do not generate yield.

Multicoin backs Grass

Multicoin Capital invested in Grass, which describes itself as a “read layer for machine intelligence,” through its hedge and venture funds.

Grass has demonstrated commercial viability by generating significant revenue and reaching profitability after providing pretraining data to frontier AI laboratories through millions of residential connections.

Multicoin said Grass could become important infrastructure for autonomous AI agents by offering specialized search and content APIs that provide live context during inference.

S&P 500 breadth deteriorates

Only 25% of S&P 500 stocks were above their 50-day moving averages, the lowest level since April 2, according to the Kobeissi Letter.

That share has fallen from 70% in mid-August, highlighting the deterioration in market breadth.

Despite the weakness in broader markets, the crypto market remained relatively resilient.

Markets await jobs data

Before the PCE release, bitcoin was trading around $83,700, while gold remained just below $4,200 an ounce.

Markets had expected core PCE to rise 0.3% month over month and 3.3% year over year. GDP growth was projected at 1.5% quarter over quarter, while traders were pricing a 57% chance that the Fed would keep rates unchanged at its Oct. 28 meeting.

Standard Chartered sets $2 ENA target

Standard Chartered initiated coverage of Ethena’s ENA token with a $2 target for the end of 2028. The target was nearly 670% above ENA’s market price of approximately $0.26.

The bank cited rising demand for yield-bearing stablecoins and tokenized assets across DeFi and traditional finance. USDe reached a $10 billion market capitalization during its first nine months.

Standard Chartered also highlighted Ethena’s buyback-and-burn mechanism and estimated that USDe supply could reach $40 billion by 2028. Slower adoption and weaker growth in real-world assets were identified as potential risks.

Gold tests $4,200

Gold remained near $4,200, a level that XS.com head of business development Simon-Peter Massabni described as a key point between buyers supporting the broader uptrend and sellers anticipating a deeper pullback.

Massabni said a daily or four-hour close above $4,200 would be needed to confirm another upward leg.

Federal Reserve policy remains important for gold because the metal produces no interest income. Higher rates can therefore increase the opportunity cost of holding gold compared with bonds or cash.

Massabni said stronger-than-expected PCE inflation could create another wave of short-term selling pressure.

The next major focus for markets is Friday’s employment report. Weaker job growth could reduce expectations for additional Fed rate increases.

Bitcoin, ether and other majors

Bitcoin had slipped 0.3% to around $83,700 before the inflation figures were released.

A hotter PCE reading would have strengthened rate-hike expectations that had already contributed to a sharp bond-market selloff. Brent crude traded above $103 a barrel and had gained about 14% in September despite Middle East crude flows returning to pre-war levels.

Treasury markets steadied after 30-year yields reached their highest level since 2002, while the dollar remained close to its strongest level since July.

Ether fell 0.7% to around $2,690, while HYPE declined nearly 2%. XRP and TRX each gained less than 1%, according to CoinDesk.

CryptoQuant estimated that bitcoin spot demand had declined by about 170,000 BTC over the previous 30 days. Futures demand growth had also fallen 90% since Sept. 14.

Micron Technology was due to report earnings after the U.S. market close, with the results set to provide another test for AI-related stocks that had helped support the S&P 500 during the bond-market selloff.