The odds of an October rate increase fell by almost half from their post-inflation peak, the dollar and oil slipped, and bitcoin still slid toward $80,000 while U.S. bitcoin funds lost $261 million.
If bitcoin were simply trading the Federal Reserve, Thursday morning should have been a relief. It was not.
After Wednesday's hotter core inflation report, the probability of a Fed rate increase on Oct. 28 rose to roughly half on Wednesday morning, according to CME FedWatch data, then retreated to about 26% overnight. The dollar index fell about 0.7%, Brent crude dropped about 2% and the 10-year Treasury yield ended Wednesday below Tuesday's close.
Bitcoin fell regardless. It slipped below $81,000 at about 10:20 p.m. ET as Asian chip stocks slid, dropped as low as about $80,400, and traded near $81,150 at about 4:45 a.m. ET, down 2.7% over 24 hours. That puts it almost exactly on its 50-day moving average.
What moved with it
Bitcoin's overnight slide coincided with the selloff in Asian chip stocks, not with any move in rates. South Korea's Kospi fell 7.6% and triggered a circuit breaker for the first time since July, with Samsung Electronics down nearly 10% and SK Hynix down about 11%. Japan's Nikkei closed down 4.9%. Nasdaq 100 futures were down about 1.2%. The selling followed a sharp decline in AI-linked stocks and bonds in the U.S. on Wednesday, led by CoreWeave.
Listed crypto companies had already absorbed much of that pressure during Wednesday's session, when they fell several times as far as the coin itself. Overnight, bitcoin moved with them. The two moves overlapped in time, which does not establish that one caused the other; weakness in technology may simply have spilled into both markets at once.
Flows and leverage
U.S. spot bitcoin exchange-traded funds had net outflows of $261.4 million on Wednesday, according to Farside Investors data, reversing $175.7 million of inflows on Tuesday. Fidelity's FBTC lost $152.7 million and BlackRock's IBIT $110.9 million. Spot ether funds lost $129.5 million.
Leveraged traders were forced out. About $950 million of crypto positions were liquidated over 24 hours, roughly $876 million of them bets on rising prices, according to CoinGlass data.
Three explanations
The first is AI-credit contagion: stress in data center financing hit chipmakers, then Asian equity markets, then the risk budgets that hold crypto.
The second is that crypto is simply lagging the rates story, and the fade in hike odds has not yet registered.
The third is internal: crowded long positions, particularly in ether, turned a modest macro move into a larger one.
The timing is more consistent with the first. Rate-sensitive signals improved overnight while crypto fell in step with Asian technology shares. That matters for what to watch next. If bitcoin is trading as a high-beta technology asset, credit spreads and AI financing news may move it more than Thursday's producer price data.
What to watch
Producer prices and retail sales at 8:30 a.m., Thursday's ETF flow figures, the weekly bitcoin options expiry on Friday, and whether the 200-day moving average near $72,200 comes into play if the 50-day gives way.