Why did the data, which came in above expectations, shake the market?

The US inflation figures for October have been released. Headline CPI rose by 0.4% month-on-month, while core CPI increased by 0.3%. On paper, this might seem like a minor difference, but the market did not perceive it as such—largely because the expectation for core CPI was 0.2%. The actual figure of 0.3% effectively locked in a 25-basis-point rate hike for December, while the probability of a 50-basis-point increase rose to 14.7%.

The reason for this lies in a single statement: Fed Governor Waller had previously suggested that if core CPI were to come in at 0.3%, a more aggressive 50-basis-point move might be necessary. The market did not forget that remark. When the data hit that specific threshold, investors began to reprice the December meeting. In short, the cause of the market turbulence was not the figure itself, but rather how that figure aligned with a statement previously made by a Fed official.

What do the details of the data reveal?

A closer look clarifies the picture. More than 30% of the monthly increase is driven by shelter costs. Food prices rose by 0.5% for the month, reversing the flat trend seen in September. Meanwhile, the energy sector—which had surged by 5.2% in September—slowed to an increase of 0.7%.

What does this mean? Inflation is proving "sticky"; the resistance is not driven by commodities, but rather by services and shelter costs. For those who expected inflation to fall as oil prices dropped, this data came as a disappointment—because the problem this time lies not at the gas pump, but in rents and the cost of food. As long as services inflation remains this persistent, the Fed’s task will not get any easier. Even if the headline figure cools down, the core remains stubborn.

Why was the market reaction so sharp?

The response following the data release was swift and severe. Bitcoin fell to $73,518, testing an 11-week low. Within five minutes, approximately $200 million worth of leveraged positions were liquidated. Gold plummeted from $4,146 to $4,021 intraday. The yield on the 10-year U.S. Treasury note climbed to 5.012%.

These three movements tell the same story: interest rate expectations are rising, while risk appetite is waning. As bond yields climb, both crypto and gold come under pressure—neither asset generates interest. The leveraged segment of the market also takes the initial hit; a $200 million liquidation in just five minutes highlights the extent of leverage in the system. It is not the data itself, but rather the leverage that amplifies the shock.

What is the outlook for December?

The prevailing scenario is that a 25-basis-point hike by the Fed in December has largely been priced in. The question now is whether it will be 25 or 50 basis points. A surprise 50-basis-point move could exert further pressure on Bitcoin and gold by driving bond yields even higher. However, this remains a minority view, with a probability of 14.7%.

Then there is the other side of the coin. The trajectory of inflation remains uncertain. Should there be a sharp decline, risk appetite could return rapidly. The market demonstrated this just last week: as oil prices fell, the Seoul market rose, and the Nasdaq recovered, everyone was suddenly able to breathe a sigh of relief. In short, this data point hasn’t ended the story; it has simply intensified the game until the next set of data arrives. Between now and the December meeting, we will see more commentary and more data.

Why did both gold and Bitcoin fall at the same time?

People generally view gold as a hedge against inflation. However, when expectations for interest rate hikes strengthen, gold tends to decline. This is because gold does not yield interest, whereas bonds do. When interest rates climb above 5%, capital shifts toward bonds. A similar logic applies to Bitcoin; risky assets are typically the first to be sold off when interest rates rise.

Therefore, the simultaneous decline in gold and Bitcoin is not a contradiction. Both are under pressure for the same reason: a rise in real interest rates. A divergence will only emerge once interest rate expectations stabilize. Until then, both are swimming against the same current.

What does it mean to remain calm after data like this?

On days like these, the costliest mistake is to shift your position based on a single data point. Altering your entire strategy just because one piece of data has come in—only to potentially change it again when the next one arrives—is counterproductive. This week’s calendar is packed: we’ve had the CPI, the PPI is on the way, and there will be ongoing commentary from the Fed. Each of these will pull prices in one direction or another.

In practical terms, this means staying measured and avoiding leverage. A single candlestick cannot tell you whether $73,518 is a definitive bottom for Bitcoin or merely a temporary stop. Likewise, a single day’s action cannot determine whether the $4,021 level will hold for gold. Take note of the persistent inflation in housing and food costs; be aware that a 25-basis-point hike is already priced in for December, and keep the possibility of a 50-basis-point hike in mind. Above all, base your decisions not on a single data point, but on the trend established over several market closes. This week, the winner will not be the one who moves the fastest, but the one who thinks the most clearly.

This content is for informational purposes only and does not constitute investment advice.

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