The token jumped above $85,500 after the inflation report and gave most of it back as the 10-year Treasury yield climbed to its highest level since 2002.
Bitcoin heads into the last hours of the third quarter near $84,000, up roughly 44% from about $58,500 at the start of July.
That would be its strongest third quarter since 2017. It would also leave the token about 33% below its all-time high of roughly $126,100.
The inflation day
Wednesday showed both forces acting on it. Bitcoin opened near $83,624 and jumped as high as $85,598.94, a gain of about 2.4%, after August inflation data came in below forecasts that had been set before the government's revisions. By about 2 p.m. Eastern, it had slipped back to about $84,037, up roughly 0.5% on the day.
Over the same hours, the 10-year Treasury yield rose past its 2007 peak to 5.304%, its highest since May 2002. Ether traded near $2,650.
Vetle Lunde, an analyst at K33, said rising yields are "pushing investors away from risk."
The flows
U.S. spot bitcoin exchange-traded funds took in $66.2 million on Sept. 29, their ninth straight day of net inflows. IBIT drew $51.1 million and ARKB $33.2 million, while BITB saw $18.1 million leave. Spot ether funds had net outflows of $2.8 million.
The quarter in context
Bitcoin's quarter ran opposite to the bond market's. Over the same three months, the 10-year yield was on pace to rise about 84 basis points, the largest quarterly increase since 1994. Higher yields raise the cost of holding an asset that pays no interest. Bitcoin rose by more than two-fifths anyway.
Bitcoin rose about 25% in August and about 7% in September, so most of the quarter's advance came before this month.
Two readings
One reading is that the Fed's path is getting easier. A second straight soft monthly core reading and lower odds of an October rate increase give bitcoin room to extend its quarter into the fourth, with steady ETF inflows as support.
The other reading is that the relief was built on revisions to July rather than a cooler August, and that yields at a 24-year high are the more durable signal. On that view, the fade from $85,600 is the more accurate read of the day.
What to watch
The quarterly close at midnight UTC sets the official third-quarter figure. Friday's payroll report and the path of the 10-year yield will decide whether bitcoin can build on it in October or keeps giving back rallies.