The initial recovery was supported by declining expectations that the US Federal Reserve would raise interest rates twice before the end of the year. Despite September's elevated inflation figures, with the Consumer Price Index (CPI) reaching 3.7% and the Producer Price Index (PPI) rising by 6.3% year-on-year, policymakers have adopted a more cautious stance as they assess the economic effects of previous tightening. Fed Chair Kevin Warsh has emphasized that upcoming policy decisions are not predetermined, leaving officials room to respond to changing economic conditions. Market expectations now favour keeping interest rates unchanged in October, followed by a possible 25-basis-point increase in December. The shift in monetary policy expectations initially supported assets outside the US dollar, allowing BTC/USD to reach a three-week high above 84800.00.
However, sentiment deteriorated as investors reacted to developments in the technology sector. Tesla Inc. reported mixed financial results for the third quarter, with revenue of $28.05 billion, broadly in line with market expectations. Capital expenditures reached $4.73 billion, significantly below analysts' estimates of approximately $7.95 billion. The company also lowered its full-year investment outlook, raising questions about the pace of spending on artificial intelligence and other technology projects. Tesla shares came under pressure, while the broader sell-off extended to Asian equities. Hong Kong's Hang Seng Index declined by around 3.0%, South Korea's KOSPI fell approximately 3.5%, and Japan's Nikkei 225 lost 2.7% during Thursday's trading session.
The US dollar also received support from increased demand for safe-haven assets as geopolitical tensions in the Persian Gulf continued to rise. President Donald Trump stated that Washington was not conducting negotiations with Tehran, adding to concerns about a possible new escalation of the conflict. The US State Department also ordered non-essential personnel and their families to leave diplomatic facilities in Saudi Arabia following growing security threats. A renewed expansion of military operations in the region could push oil prices higher, increase inflationary pressures and complicate the Federal Reserve's monetary policy outlook, potentially weighing on cryptocurrencies.
Among the latest industry developments, Ethereum developers have postponed the Glamsterdam upgrade on the Hoodi test network because of concerns about the compatibility of proposed gas-accounting changes with existing smart contracts. According to the Ethereum Foundation's official announcement, the activation originally scheduled for October 26 has been cancelled, and no replacement date has been set. Meanwhile, US Democratic Senator Richard Blumenthal has launched an inquiry into reported payments by Tether Operations Ltd. to a consulting firm associated with Bo Hines, a former White House cryptocurrency adviser. The senator has requested documents concerning the company's business relationships and lobbying activities, although the allegations have not been established as legal violations.
Overall, sentiment in the digital asset market has weakened. The Crypto Fear & Greed Index fell to 50 points on October 23, returning to neutral territory after previously indicating stronger optimism. Against this backdrop, the cryptocurrency market could remain under pressure or move into consolidation next week as investors assess monetary policy expectations, geopolitical risks and developments within the industry.
