Bitcoin's $80,000 Support Tested Amid Inflation Data and ETF Inflows

Bitcoin is maintaining its position around the $80,000 threshold, a level identified by Glassnode as the estimated average acquisition cost for U.S. spot Bitcoin ETFs and corporate treasuries. However, recent reports indicate that ETF inflows have significantly decreased, with a staggering 95.6% drop observed in just one day. This decline raises concerns about the sustainability of Bitcoin's current price level.

On October 19, Farside Investors recorded net inflows of $526.7 million, followed by $23.2 million on October 20, both of which were positive sessions. A $26 billion five-year TIPS auction is scheduled for Thursday, along with flash PMIs and the final University of Michigan inflation expectations report on Friday, all of which will precede the Federal Reserve's decision on October 28.

According to Glassnode's report dated October 21, the selloff on October 15 saw Bitcoin close near $80,100, briefly dipping below the estimated ETF cost basis of approximately $81,500. Corporate treasuries are reported to hold Bitcoin at an average cost of around $80,200. The largest block of spot bids on Binance was situated near the $80,000 mark, but the recent selloff consumed most of these bids, which began to reappear by October 20 at a reduced size.

The average cost basis for ETFs reflects the average price of their holdings, while a treasury's cost basis indicates the price paid for its assets, leaving future purchases to its discretion. Notably, Glassnode has identified overhead supply levels between $85,000 and $87,500, where coins purchased six to twelve months ago average around $86,700. Additionally, modeled futures liquidations cluster between $85,000 and $87,000.

Conversely, a liquidation cluster is positioned near $79,600, with the True Market Mean resting at approximately $77,600. The combined net inflows from October 19 and 20 amounted to $549.9 million, suggesting that the slowdown in inflows reflects a lack of new capital entering the market, while withdrawals are occurring elsewhere.

Market Trends and Economic Indicators Impacting Bitcoin's Performance

Glassnode also reports that the average trading volume for spot ETFs over the past 30 days is less than a quarter of what it was a year ago. Corporate treasury purchases since June have been running at less than 10% of the peak seen in November 2024. The Consumer Price Index (CPI) for September reached an annual rate of 3.7%, while the preliminary Michigan survey indicated one-year inflation expectations at 4.7% and longer-term expectations at 3.5%. Following a rate hike in September, 94 out of 100 economists surveyed by Reuters anticipate the Fed will maintain its current target range of 3.75% to 4.00% during the upcoming meeting.

Should inflation readings exceed expectations, this could lead to an increase in short-dated Treasury yields and bolster the dollar. As of October 20, the two-year yield was hovering around 4.8%, having risen more than a percentage point since 2026. The relationship between inflation data and Treasury yields is crucial, especially following a hot producer-price report on October 15, which coincided with a decline in the 10-year yield to about 5.087% and a retreat of the dollar from an 18-month high.

The upcoming five-year TIPS auction will be a critical test of demand for inflation-protected debt. A weak reception could result in higher real yields, even if inflation expectations remain steady. It will be important to analyze both the five-year real yield and breakeven inflation rates together. The flash PMIs and final Michigan survey will provide additional insights into business pricing and household expectations.

Bitcoin's Resilience Tested as Market Dynamics Shift

If Bitcoin can maintain its position above $80,000, it may have the potential to test resistance levels between $85,000 and $87,500, especially if the Michigan expectations hold steady or decrease. A move above $87,500 on increased volume and renewed ETF inflows would indicate strong demand surpassing the cost basis. Conversely, if expectations exceed preliminary readings, leading to rising yields and a stronger dollar, the replenished bids may face significant challenges.

A close below $80,000 would bring the $79,600 liquidation cluster into play, followed by the $77,600 True Market Mean. If Bitcoin can hold above $80,000 while attracting inflows, it may suggest that demand is offsetting potential rate shocks. As it stands, Bitcoin has found buyers near its institutional cost bases, and the forthcoming data will be pivotal in determining whether this demand can reach the supply levels above it before the Fed's meeting.