Inflation is heating up again, and the market is starting to worry that high interest rates will persist longer. The decline of Bitcoin, U.S. stocks, and gold reflects the repricing of different assets in response to interest rates, the dollar, and economic expectations.
On October 14, the U.S. released the September CPI data. Overall CPI rose 3.7% year-on-year, higher than August's 3.4%; core CPI rose 2.6% year-on-year, higher than the previous value of 2.4%. Overall CPI increased 0.6% month-on-month, with gasoline prices rising 9.1% month-on-month, contributing to more than half of the overall CPI increase for the month.
After the data was released, the dollar strengthened, U.S. Treasury yields rose, Bitcoin fell below $82,000, the three major U.S. stock indices closed down, and gold also fell back.
The core issue that the market is concerned about is: If inflation remains high, the Federal Reserve may maintain high interest rates longer, or even raise rates again. This will affect the valuation of risk assets and also change the allocation of funds between different assets.
1. Bitcoin: Fell below $82,000, what to watch next?
On October 14, during U.S. market trading, Bitcoin briefly fell to about $81,926, breaching the $82,000 mark.
This round of decline is influenced by the macro environment and may also be amplified by adjustments in leveraged positions. When prices rapidly fall back, some leveraged longs may be forced to liquidate, potentially increasing short-term selling pressure further.
Next, three price zones can be monitored:
● $81,000—$82,000: Monitor if short-term buying can absorb selling pressure.
● $80,000: If the previous zone continues to be breached, check if the market shows further adjustment.
● $84,000—$85,000: Watch if the rebound can receive sustained buying support.
These price points are for observation and do not guarantee that prices will reverse here. Rather than fixating on a specific number, it is more meaningful to pay attention to changes in trading volume, spot demand, and leveraged positions.
2. U.S. Stocks: The AI market still hinges on whether earnings can be realized
On October 14, the three major U.S. stock indices collectively closed down: The Nasdaq index fell 1.88%, the S&P 500 index fell 1.11%, and the Dow Jones index fell 0.09%.
Rising interest rates usually put pressure on the valuations of growth stocks. Some technology companies’ valuations depend on earnings expectations for the coming years, when the market demands higher return rates, the discounted value of those future profits will decline.
The AI sector also faces another test: How much revenue and profit can the substantial investment ultimately bring?
Data centers, chips, and computational infrastructure require ongoing investment. If capital expenditures continuously increase, but revenue growth and profit realization do not meet expectations, the market may simultaneously lower earnings expectations and valuations.
Therefore, in addition to paying attention to interest rate changes, one should also monitor corporate earnings reports, order growth, and returns on capital expenditures. The long-term development prospects of AI and whether the valuations of tech stocks are reasonable in the short term are two different questions.
3. Gold and Oil: One is affected by interest rates, the other influences inflation
Why did gold also drop?
Gold has safe-haven characteristics, but it does not necessarily rise when the market declines.
When the dollar strengthens and interest rate expectations rise, the opportunity cost of holding gold increases, putting potential pressure on gold prices. On October 14, spot gold weakened, briefly falling to around $4,079 per ounce during the session.
If geopolitical risks continue to escalate, safe-haven demand may support gold; however, if the dollar and interest rates keep strengthening, gold may also continue to face headwinds.
Why is oil important?
Oil is an essential variable in this round of inflation trading.
The situation in the Middle East and transportation risks may push energy prices higher, increasing transportation and production costs, thus affecting inflation. If oil prices remain high over the long term, the Federal Reserve's task to reduce inflation will become more challenging.
On October 14, the settlement price for Brent crude oil futures was approximately $106.06 per barrel.
However, rising oil prices do not mean that energy assets only rise and do not fall. Supply risks may support prices, but rising energy costs may also squeeze corporate profits and household consumption, and slowing demand may limit oil price increases.
4. Will the Federal Reserve raise rates again?
After the September CPI was announced, concerns over another rate hike increased, but traders adjusting their expectations does not mean that the Federal Reserve has made a decision.
Next, three aspects should be closely watched:
1. Core inflation and PPI: To determine whether price pressures are expanding or primarily concentrated in a few items like energy.
2. Employment and consumption: If demand remains robust, the Federal Reserve may have more reason to maintain a tightening policy; if employment and consumption weaken, policy choices will become more complex.
3. Oil prices: If energy supply risks ease, a decline in oil prices could reduce inflationary pressures; conversely, energy costs may continue to impact overall prices.
Markets trade changes in expectations, not simply good or bad news. If subsequent data improves, risk assets may still recover; if inflation continues to exceed expectations, the market may further adjust its judgements on interest rates and earnings.
5. What three market scenarios to focus on next?
Scenario 1: Oil prices retreat, inflation gradually cools.
If subsequent inflation data improves, concerns over interest rates may ease, and growth stocks and crypto assets may see a recovery. Whether Bitcoin can stabilize will also need to consider spot demand and trading volume.
Scenario 2: Inflation remains persistently high, high-interest rates maintained longer.
If core inflation does not decrease soon, the market may continue to lower expectations for monetary easing. Growth stocks and crypto assets may both face valuation pressure, especially assets that are less liquid and reliant on market sentiment, which are more prone to significant volatility.
Scenario 3: High inflation while economic growth begins to slow.
This situation will make it harder for the market to judge. Oil may be affected by both supply risks and weak demand; gold may oscillate between safe-haven demand and interest rate pressures; Bitcoin may also fluctuate with changes in market expectations.
Therefore, rather than rushing to bet on a single direction, it is better to wait for subsequent data to gradually confirm.
6. What signals should traders focus on next?
The market observation focus can be summarized into four groups of signals:
● Macroeconomic data: U.S. Treasury yields, the dollar, core inflation, and employment data.
● Fund flows: Continuous fund changes in Bitcoin spot ETFs, observing whether institutional demand has improved.
● Prices and trading volume: Attention to the strength of support at key price levels, as well as whether rebounds have sustained buying support.
● Leverage changes: Observing the scale of liquidations and leveraged positions to determine whether concentrated liquidations are amplifying market volatility.
These indicators need to be viewed together; a single signal is insufficient to indicate that the market has reversed.
Conclusion: While watching the market trend, don't overlook the arrangement of idle funds
CPI, interest rates, and market expectations are changing daily. In addition to monitoring market rises and falls, it is also worthwhile to consider how to arrange funds that are temporarily unnecessary in the account.
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