Market Commentary

TWO HOT INFLATION REPORTS REAFFIRM THE RESTRICTIVE BIAS

The week turned on two numbers. On Wednesday, October 14, the September CPI was released: annual inflation accelerated to 3.7%, above the 3.6% consensus, and rose 0.6% on the month. Core inflation (which excludes food and energy) advanced to 2.6% year over year. The driver was energy: gasoline rose more than 9% and explained close to half the index's increase, though the pressures were broad. The next day brought the September PPI — the producer price index, which measures what businesses charge and often anticipates consumer pressures — even more emphatic: +1.3% on the month, more than double the 0.5% expected, and +6.3% year over year, the largest gain since 2022. Two upside surprises in two days leave little room for interpretation: inflation is not cooling at the pace the Fed needs.

The effect was felt across markets, though not always in the expected direction. The 2-year Treasury yield — the most sensitive to Fed decisions — rose on Wednesday with the CPI to near 4.81%, its highest since September 29. On Thursday, despite the PPI print, the opposite happened: investors sought refuge in bonds and yields fell, with the 2-year easing toward the 4.75% area. It is a signal worth not overlooking: the bond market read the week's inflation more as a risk to growth than as a reason to demand higher rates. In equities, the S&P 500 shed more than 1% on Wednesday, with added pressure on AI-linked stocks.

OIL CLOSES AT HIGHS ON HORMUZ

The second front was energy, and it aggravated the first. Brent touched USD 110 a barrel Friday — its highest since May — and closed the week at USD 109.86, its highest close since May 19; U.S. WTI advanced more than 10% on the week. The trigger was geopolitical: Iran intensified its attacks on vessels in the Strait of Hormuz — at least nine ships attacked since Sunday — in an attempt to choke off crude exports through that passage. Shipments through the strait fell to an average of 11.62 million barrels a day in the week to October 13, against a baseline of 17.15 million, that is, close to 68% of the pre-conflict level. Added to this were Houthi missiles at Saudi Arabia and Ukraine's pledge to keep striking Russian refineries. It is the chain we keep describing — Hormuz, oil, inflation, Fed — and this week it arrived in concentrated form.

WHAT'S NEXT: THE OCTOBER 28 FED

With the inflation data now published, the focus shifts to the October 28 Fed meeting. On Friday, Fed Chair Kevin Warsh spoke at the IMF meetings in Bangkok: he noted the economy has broadly conformed to the Committee's expectations since the September hike, but declined to prejudge the October decision. It was the Fed's last public communication before the meeting: the blackout period runs from October 17 to October 29, and there will be no further CPI print before the decision — the next one is published on November 10. The market arrives at the meeting with the information it already has. The debate is no longer whether there will be another hike this year, rather in which of the two remaining meetings — October or December — the Fed will choose to move.

Bitcoin (BTC): Trades at USD 81,700 (-1.4% versus the prior Friday's reference). It had a volatile but contained path: it gave ground with the inflation data, piercing USD 80,000 Thursday after the PPI print, a level from which it rebounded quickly back above USD 82,000. What matters is the relative resilience, and this week it had an emphatic reference: BTC fell 1.4% in a week when the Nasdaq lost close to 4.5% and the S&P 500 close to 2%, both their worst week since June. BTC dominance — Bitcoin's weight within the total value of the Digital Assets market — stayed firm, around 58% per CoinGecko (other providers put it near 60%; dispersion between trackers is common): the week's weakness was more a rotation out of risk within Digital Assets than a deterioration specific to BTC. USD 84,000 was the ceiling that capped it from Monday to Wednesday. Support at USD 80,000 and, below, USD 78,000; resistance at USD 84,000 and USD 86,600.

Ethereum (ETH): Trades at USD 2,420 (-2.6%), with the widest path of the three; it recovered toward the USD 2,400–2,450 zone after Thursday's slump. ETH was also the asset that led the week's liquidations: with the CPI print, USD 282MM in ETH positions were force-closed, above BTC's slightly over USD 200MM, reflecting leverage that had not been reduced before the drop. The USD 2,325 level stands as the key support: losing it would open the door to a fresh wave of forced selling. Support at USD 2,325–2,380; resistance at USD 2,550.

Solana (SOL): Trades at USD 104 (-4.5%), the hardest hit of the three. It touched a low of USD 101 Thursday, testing the USD 100 psychological level, before stabilizing above it, with its ETF flow negative for a second straight week and no buying catalyst of its own. The correction is pronounced but consistent with the general risk pullback; USD 100 is the reference to watch to gauge whether the underlying trend stays intact. Support at USD 100; resistance at USD 108–109, the ceiling that capped it from Tuesday to Thursday.

The week was dominated by forced deleveraging. Across several sessions, elevated volumes of leveraged positions were liquidated, almost always bullish bets (longs), which close automatically when price falls below certain levels. Monday saw some USD 489MM liquidated in 24 hours, of which more than USD 400MM in longs. The larger episode came with Wednesday's CPI print: over the following 24 hours, close to USD 950MM was liquidated across the market, around 90% of it long positions, affecting more than 177,000 traders. On Thursday, with the PPI print, a separate and briefer episode followed: BTC pierced USD 80,000 to a low of USD 79,800 and recovered USD 82,000 within roughly two hours.

The relative behavior of the assets is, again, the most useful read: that BTC fell much less than ETH and SOL, with its dominance firm and ETH leading the liquidations, shows the market did not flee Digital Assets wholesale but rotated from the higher-"beta" assets (more sensitive to the cycle and more leveraged) toward the one of higher relative quality. It is the typical behavior of a risk-off phase: when appetite returns, it tends to be BTC that leads.

The pressure also reached sector equities: Strategy closed Friday down 9.5% after the MSCI decision. The punishment of higher-beta assets was not confined to spot — it reached the listed vehicles.

On the positioning front, the market is still clearing leverage excesses: spot-channel selling pressure — the ETF outflows — eased in BTC, while leverage in the alts reduced more abruptly. It is a correction healthy in its mechanics, if uncomfortable in price.

Expected volatility for the week ahead: high. The run-up to the October 28 Fed meeting, the evolution of the Hormuz conflict, and the digestion of the inflation data keep several fronts open.

BTC: -USD 146.0MM, a net outflow that nonetheless marks a sharp improvement from the prior week, when the October 7 and 8 sessions alone accumulated more than USD 700MM in outflows. The pattern was two-sided: after a negative Monday (-65.4), Tuesday posted a strong inflow (+175.7) led by the BlackRock and Fidelity funds, interrupted by a sizable outflow Wednesday (-261.4), the CPI day. The read is that aggressive institutional selling of BTC eased: the spot channel ceased to be a one-directional source of pressure, which helps explain why BTC held up better.

ETH: -USD 250.4MM, with sustained outflows through the week (only Tuesday saw a modest inflow of +24.8). The withdrawals, led by the BlackRock funds, combined with the fact that ETH was the most leveraged asset and the one that suffered most in the liquidations. The allocation thesis in ETH's favor that had reappeared weeks ago remains, for now, on pause: it will take sustained inflows to revive it.

SOL: -USD 12.8MM, a moderate outflow that marks the second straight negative week for Solana ETFs, after fourteen weeks of inflows that broke last week. The pullback is smaller in magnitude than BTC's and ETH's, but it confirms the demand retreat was broad-based.

The other institutional channel. While ETFs posted outflows, corporate treasuries bought: Strive added 6,133 BTC over two days — some USD 515MM — to 35,595 BTC, and upsized a preferred offering to USD 630MM. The two channels moved in opposite directions. Cutting the other way, MSCI approved a methodology excluding "non-operating" companies from its indexes, exposing Strategy — the largest corporate Bitcoin holder, with some 848,250 BTC — along with Metaplanet and SharpLink. The final list publishes November 11 and the changes take effect from the 30th. If they leave the indexes, tracking funds must sell those shares: the pressure falls on the listed vehicle, not on the Bitcoin held on the balance sheet.