Key Highlights
- Fed funds futures put the odds of an October rate hike at 22%, down from 66% earlier in the week, according to Glassnode.
- The US added 29,000 jobs in September, below the 84,000 expected, while the unemployment rate was 4.2%.
- Bitcoin gained about 1% over the week as rate hike expectations declined, while its reaction to individual economic developments remained limited.
Bitcoin gained about 1% over the week as market expectations for another US Federal Reserve rate hike in October declined, according to blockchain analytics firm Glassnode.
Glassnode said in an October 3 research report that Fed funds futures had priced a 66% chance of a quarter-point hike at the Federal Reserve’s October 28 meeting on Monday. By Friday afternoon, that probability had fallen to 22%.
The decline followed comments from Fed officials, softer-than-expected inflation data and a weaker September jobs report.
Fed rate hike expectations drop through the week
Glassnode linked the decline in rate hike expectations to several developments during the week.
New York Fed President John Williams said Tuesday that there was “no need for urgency” after the Fed’s September rate hike and that policymakers had time to gather more information before moving again.
Glassnode said the probability of an October hike fell from 66% to 50% within two hours of Williams’ comments.
On Wednesday, core personal consumption expenditures (PCE) inflation came in below expectations. Glassnode said the reading reduced rate hike expectations by another 10 percentage points.
Fed Vice Chair Philip Jefferson later said the central bank may need more time and data before its next move, contributing to another decline in rate hike expectations.
Glassnode noted that Bitcoin’s initial response to these developments was positive but relatively limited.
Markets already expected the Fed to hold in October
A recent report of Kalshi data showed traders assigning an 84% probability to a rate hold in October, as markets looked ahead to the next Federal Open Market Committee meeting.
The Kalshi estimate was based on prediction-market trading, while Glassnode’s latest figure comes from Fed funds futures. The two measures therefore reflect different market instruments and should not be treated as identical.
The Fed had raised its target federal funds rate to 3.75%-4% in September, its first rate hike since July 2023. In September, Grayscale’s Zach Pandl said the move was viewed as a mid-cycle adjustment, with Pandl expecting a limited effect on crypto allocation.
US jobs growth falls below expectations
The September jobs report added further pressure to expectations for another rate hike.
The US economy added 29,000 jobs in September, compared with 84,000 expected, according to the data cited by Glassnode. The unemployment rate stood at 4.2%, while July and August employment figures were revised lower.
Glassnode said the three-month average provides a better view of the labor market because individual monthly figures can be volatile. That average stood at about 51,000 jobs per month, compared with an average of 183,000 during the 2010s.
Glassnode said the slowdown in hiring could weigh against further rate increases, as higher rates could add pressure to an already cooling labor market.
At the same time, inflation remains above the Fed’s target. Core PCE prices were up 3% year over year, compared with the Fed’s 2% target.
Bitcoin’s reaction remains limited
Bitcoin gained about 1% over the same period.
However, Glassnode said the cryptocurrency’s response to individual rate-related developments was generally small or short-lived.
Bitcoin rose 0.4% after Williams’ comments and initially moved higher after the PCE report before giving up the move. Bitcoin later moved above its Monday level as rate hike expectations continued to decline.
Glassnode said Bitcoin rose another 2.1% overnight into Friday, even though October hike expectations changed little during that period.
Short sellers were squeezed before jobs report
Derivatives positioning also shifted ahead of the employment data.
Glassnode said open interest increased by $2.1 billion during the 24 hours before the jobs report. Bitcoin itself gained about 3% during that period, while open interest measured in BTC increased about 2.5%.
The largest short liquidation wave came about eight hours before the jobs report. Around $50 million in short positions were liquidated within 10 minutes at 04:20 UTC on Friday, according to Glassnode.
The research firm noted that there was no scheduled economic data release at that time.
After the jobs report, the direction reversed. Bitcoin slipped, and about $11 million in long positions were liquidated, compared with around $2 million in shorts.
By 15:40 UTC, Bitcoin was more than 1% below its level immediately before the jobs report.
Treasury yields reflect changing rate expectations
Treasury yields also moved as markets reassessed the path of near-term Fed policy.
Glassnode said the two-year Treasury yield fell, reflecting lower expectations for near-term Fed rates, while the 10-year yield rose. This pushed the spread between the two maturities to 42 basis points, up from around 20 basis points following the Fed’s September rate hike.
Glassnode said a steepening yield curve driven by falling short-term yields generally indicates that traders expect fewer rate increases ahead.
However, the move did not result in lower long-term borrowing costs. The 10-year Treasury yield was around 5.2% on Friday, according to the report.
Options market saw limited payrolls risk
Glassnode’s analysis of Bitcoin options suggested traders were not pricing in a large near-term volatility move ahead of the jobs report.
Before the report, one-week implied volatility remained below one-month implied volatility for the preceding 48 hours.
Glassnode said this differed from the period ahead of the Fed’s September 16 decision, when short-dated volatility carried a premium.
The firm also reviewed 32 jobs reports since 2024 and found that one-week implied volatility fell after 23 of them.
For the latest report, volatility declined faster than the historical median, although Glassnode noted that some of the decline may reflect a normal Friday pattern.
October CPI becomes the next rate test
The Fed’s October rate decision is not settled, with futures still pricing a 22% probability of a hike, according to Glassnode.
The next key data point is the September CPI report due October 14.
Glassnode said a core CPI reading above expectations could push October rate hike expectations higher again, while a reading at or below expectations could leave markets looking toward December for the next expected move.
The analysis is based on data through October 2, 2026, with different cutoff times for the report’s 10-minute and hourly series.
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