Core PCE inflation data met expectations at 2.9% in the latest reading, reinforcing expectations for a Federal Reserve rate cut, but the market remains unclear about an upward movement.
Analysts agree that PCE numbers within the expected range are a positive sign for the crypto market’s trajectory, although spot demand must maintain its momentum.
Nevertheless, Polymarket traders maintained 81% odds for a 25 basis point cut at the Oct. 29 FOMC meeting following the release.
Risk Assets Position for Fed Dovishness
Jake Kennis, senior research analyst at Nansen, highlighted the significance of digital assets.
He said in a note:
“PCE print is important because it is the Fed’s inflation gauge. Cooler inflation readings [2.7% to 2.9%] often boost risk assets like BTC and ETH as they suggest potential Fed dovishness and lower real yields.”
Fabian Dori, chief investment officer at Sygnum Bank, provided a broader context for the inflation trajectory.
According to him:
“August’s PCE inflation data confirmed a 0.3% month-on-month and 2.7% year-on-year increase, broadly in line with expectations. While this reinforces the Fed’s narrative of gradually easing price pressures, it still leaves policymakers balancing sticky inflation with signs of a softer labour market.”
President Donald Trump praised the economic numbers, stating that “the economic numbers are great” in response to the PCE data.
Derivatives Markets Signal Range-Bound Trading
Bitfinex analysts outlined positioning strategies for the current environment.
In a note, they explained:
“Past data shows derivatives open interest often rises in the two weeks after a dovish surprise as long positions rebuild and ETF and spot flows pick up.”
The analysts highlighted the $18 billion in options expiring on Sept. 26. They expect muted, range-bound trading with heightened gamma sensitivity.
A $115,200 pivot and the $120,000 cluster remain as key inflection points. If spot holds above the lower cluster into expiry, dealer deltas flip, and post-expiry skew towards calls can drive a further leg up.
Additionally, the analysts warned of downside risks if the support levels were to fail:
“If spot breaks below the cluster, expect a faster sell-off as put protection becomes more valuable and negative funding increases.”
Key monitoring signals include real-time options open interest roll-off, daily ETF flows, perpetual funding shifts, and CME basis moves versus the spot price.
Macro Data Strengthen Fed Easing Case
September data revisions showed 911,000 fewer jobs were created between April 2024 and March 2025 than initially reported.
The revision represented the largest downward adjustment on record, dating back to 2002, and was more than 50% higher than last year’s revision.
The largest markdowns came in leisure and hospitality (-176,000), professional and business services (-158,000), and retail trade (-126,200).
The summer months of June, July, and August saw average payroll growth of just 29,000 per month, which is below the break-even level for maintaining steady unemployment rates.
The September FOMC meeting resulted in a 25 basis point rate cut, with officials signaling additional easing ahead.
Nine of 19 participants indicated one more reduction this year, while 10 projected two cuts at the October and December meetings.
The combination of in-line inflation data and substantial labor market revisions provided a clear policy direction for Fed officials.
With inflation moving closer to the Fed’s 2% target and unexpected labor market weakness, monetary policymakers appeared positioned for continued accommodation.
The convergence of PCE inflation data expectations and payroll revisions created favorable conditions for assets that typically benefit from lower interest rate environments.
Fed officials now face reduced inflationary pressure while addressing labor market concerns through adjustments to monetary policy.
The Oct. 29 FOMC meeting represents the next key catalyst for risk asset markets, with derivatives positioning and technical levels providing near-term directional clues for Bitcoin and broader cryptocurrency markets.