Bitcoin risks worst October in six years after high US inflation data and S&P 500 correlation

• Bitcoin hit a three-week low after September US inflation data came in higher than expected.
• With recent economic data not favoring a rate cut, Bitcoin could be set for its worst October performance in years.
• Bitcoin could see further declines if it follows the historical pattern with the S&P 500.

Bitcoin (BTC) and the crypto market trended lower on Thursday as US consumer price index (CPI) data for September showed inflation rising again, reducing the already slim chance of the Federal Reserve cutting its rate interest rates by another 50 basis points in November.

Crypto Market Pulls Back As Inflation Rises

According to the Bureau of Labor Statistics, data on US CPI inflation fell to 2.4% in September, more than expectations of 2.3%, while core CPI inflation rose from 3.2% to 3 .3%. This marked the first time since March 2023 that core CPI data rose.

Following the CPI report, Bitcoin, along with several cryptocurrencies in the top 50, took a dive, with the top digital asset hitting a three-week low of $58,900. Ethereum (ETH) and Solana (SOL) are also down nearly 2% in the past 24 hours, while the overall crypto market cap has lost 3.3%.

Beyond the crypto market, stocks also saw notable declines, with the S&P 500 retreating 0.7% from its all-time high of $5,791 in the past 24 hours.

Bitcoin Uptober could be in danger

According to FXStreet analyst Joshua Gibson, “Investors had generally hoped that US inflation numbers would continue to slide towards the Federal Reserve’s (Fed) annual inflation target of 2%, but September’s CPI inflation print unsettled markets, taking the legs out from under large. appetite for market risk.”

The inflation data, combined with the falling unemployment rate reported by the BLS last week, increased the odds that the Fed would not cut interest rates in November. This is in stark contrast to market sentiment two weeks ago, when investors were anticipating a further 50 basis point rate cut in November. Initially, the Fed made its first interest rate cut in four years when it decided to cut interest rates by 50 basis points on September 18.

With recent economic data not favoring an interest rate cut and investors showing signs of a risk-off attitude, Bitcoin’s potential Uptober move could be thrown out of whack for the first time in six years. Historically, Bitcoin has seen better returns in October and Q4 than any other month or quarter, according to Coinglass data. However, the outlook may change this time as recent economic data does not seem to favor the trend.

Another key point is that the US presidential election comes before the Fed meeting in November. Therefore, the outcome could have a strong impact on the market and the Fed’s next course of action.

Bitcoin could fall if the S&P 500 sees a correction

Meanwhile, the S&P 500 hit a new all-time high on Wednesday as Bitcoin rebounded. According to cryptoanalyst Ali Martinez, this is normal as Bitcoin hits an all-time high and bounces back before the index makes a similar move.

One user X also pointed out that Bitcoin could see further declines as the index turns lower after seeing a new all-time high. This follows a pattern where the leading digital asset has shown more correlation with the S&P 500 when the index is falling from its all-time high, as indicated in the chart in X’s post above.