The U.S. Consumer Price Index (CPI) increased by 0.2% in September, marginally exceeding expectations of a 0.1% rise, according to data from the U.S. Labor Department. The slight uptick was driven by higher food costs, but the annual inflation rate still recorded its smallest increase in over three years, reflecting a broader trend of slowing inflation.

In tandem with the inflation report, the U.S. also saw a rise in weekly jobless claims, adding further uncertainty to the economic outlook. Despite these factors, market expectations that the U.S. Federal Reserve will cut interest rates in November remain high. The CME FedWatch tool currently shows an 89.1% probability of a 25 basis-point rate cut at the Federal Reserve's upcoming meeting on November 7.

According to 21Shares Research Analyst Leena ElDeeb, bitcoin has become more sensitive to inflation data and central bank monetary policy decisions over the years. "A reduction in rates tends to have a favorable impact on bitcoin by lowering borrowing costs, and consequently, we anticipate a recovery in market flows following the recent geopolitical tensions that have disrupted the financial landscape," ElDeeb said.

Many analysts see the upcoming U.S. presidential election in November as a major market driver. Coinbase Head of Research David Duong said the cryptocurrency market could see increased adoption by institutional investors looking for a way to trade election outcomes.

The Coinbase analyst shared his outlook on how the U.S. election might affect the market. "We think the market reaction will ultimately be neutral to positive in the fourth quarter of 2024," Duong said. "Even if there is a sell-off after the event, we expect institutional investors to step in due to the clear upside for the asset class."

Duong also pointed out that the Federal Reserve’s September pivot towards monetary easing, combined with recent stimulus efforts from China, may take months to fully impact liquidity in the market. "Overall, we remain optimistic about the outcome for crypto, particularly from a regulatory perspective, as we approach the election," he added.

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