U.S. inflation data beats expectations, the market focus is shifting from the short-term rise and fall of Bitcoin (BTC) to whether the Federal Reserve (Fed) needs to adopt more aggressive tightening policies.

With Fed Governors Christopher Waller raises possibility of 2-yard rate hike in December, the U.S. 10-year Treasury bond yield approached 5%, and the dollar strengthened simultaneously. For cryptocurrencies, the real test may not be whether they can rebound briefly, but when interest rate pressures ease, whether institutional buying can resume, and whether the derivatives market completes deleveraging.

The risk of a 2-digit rate hike emerges, but it is not the main market expectation

according toThe latest report from the U.S. Bureau of Labor Statistics (BLS), the overall CPI increased by 0.4% month-on-month in October, and the core CPI increased by 0.3% month-on-month, both higher than economists' expectations. Although overall CPI growth was lower than September's 0.6%, core inflation remained at 0.3% for three consecutive months, indicating that underlying price pressures have not significantly subsided.

Fed Governor Christopher Waller said in a speech on November 10: "If the core CPI inflation rate in October is about 0.3% or even higher, then the December meeting should consider raising interest rates by 50 basis points."

He further warned that raising interest rates by just 25 basis points could damage the Fed's credibility in curbing inflation.

However, according to Reuters, after the CPI was released, the interest rate market once reflected about a 15% chance of a 2-digit rate hike in December, which means that most traders still regard a 1-digit rate hike as the main scenario. In other words, markets are reassessing the risk of a more aggressive rate hike but are not yet viewing it as the most likely outcome.

U.S. bond yields approach 5%, and Bitcoin faces higher funding costs

Investors should pay more attention to the reaction of the U.S. Treasury market than the CPI itself.

According to market reports on the 10th, the U.S. 2-year Treasury yield rose by about 18.4 basis points in a single day to 4.731%; the 10-year yield rose to 4.988%, and once exceeded 5% during the session. On the same day, the Nasdaq fell 0.74%, the U.S. dollar strengthened, and gold also fell about 2.62%.

This shows that higher-than-expected inflation triggers not just selling pressure on cryptocurrencies, but the repricing of future interest rates and funding costs by financial markets.

For Bitcoin, an increase in U.S. bond yields means an increase in potential returns from holding low-risk U.S. dollar assets, which may reduce the willingness of some institutional investors to bear the risk of crypto asset fluctuations. In addition, high interest rates may also suppress the valuation of technology stocks and the market's overall risk appetite, further affecting highly volatile assets such as BTC and ETH.

However, Bitcoin and U.S. Treasury yields do not always move in opposite directions. Only when the U.S. dollar, yields and risk assets continue to change simultaneously, will there be more reason to judge that the market capital environment is changing.

ETF funds and derivatives deleveraging determine whether the rebound is sustainable

In addition to macroeconomic factors, the capital structure of the crypto market itself has not yet fully improved.

According to Farside Investors,US Spot Bitcoin ETF Net outflows for three consecutive trading days on November 5, 6 and 9 were approximately US$430 million, US$412 million and US$201 million respectively, totaling approximately US$1.043 billion. This means that Bitcoin is still facing continued withdrawals from some ETF investors during the price decline.

On the other hand, CoinGlass’ November 11 query snapshot shows,BTC futures open interestThe volume was approximately $51.4 billion, and the 24-hour liquidation amount was approximately $206 million, of which approximately 87% came from long positions.

Deleveraging itself is not necessarily entirely negative. When highly leveraged positions are cleared, the risk of chain liquidations in the market in the future may also decrease. However, if the subsequent rebound relies mainly on short-term short covering rather than spot buying and ETF fund flow, the sustainability of the price increase may be limited.

Therefore, compared with a single price level, whether the ETF can resume sustained net inflows and whether Bitcoin can rise without over-expansion of leverage will be more meaningful signals to observe.

Can Bitcoin’s Rally Last? Three situations worth observing

The market may face three different scenarios next.

• First, inflationary pressure has weakened and interest rate hike expectations have cooled. If subsequent price data are lower than expected, U.S. bond yields will fall in tandem with the U.S. dollar, and risk assets may gain breathing space; if ETF buying also resumes, it will be conducive to the continuation of Bitcoin's rebound.
• Second, core inflation remains high and the Fed continues to send hawkish signals. If the market further increases the probability of raising interest rates by 2%, long-term and short-term U.S. bond yields may continue to rise under pressure, limiting investors' willingness to allocate highly volatile assets.
• Third, high inflation coincides with economic slowdown. If employment and consumption data weaken in the future, but the Fed still finds it difficult to relax policy, financial markets may face both growth and inflation risks, causing Bitcoin and technology stocks to continue to fluctuate.

The above are conditional market scenarios and are not definite predictions of price direction.

What Bitcoin really needs is more than a technical rebound. The core question in the current market is not just whether Bitcoin can hold a certain price, but whether U.S. inflation allows the Fed to slow down the pace of interest rate increases.

Investors should next monitor three signals: U.S. bond yields, the U.S. dollar and ETF capital flows. If yields fall back, the dollar stops strengthening, and institutional funds return to flow, conditions for a rebound may be more robust. On the contrary, if interest rate expectations continue to be revised upward and funds continue to withdraw from risky assets, even if BTC experiences a short-term rebound, it may not mean that the correction has ended.

As the Fed's December 8-9 interest rate meeting approaches, how the market re-evaluates the path of inflation and interest rate increases will be more worthy of attention than the rise or fall of currency prices in a single day.

〈The Fed is likely to raise interest rates by 2% in December. Can Bitcoin’s rebound continue? U.S. bond yields approach 5%, pay attention to three major funding signals〉This article was first published inBlock Guest》.