A year ago on Tuesday, bitcoin touched about $126,000 and the crypto industry declared a new era. It now trades near $86,000, roughly 32% below that record, according to investingLive. To get back to the high it needs a gain of nearly 50%. What changed is not what crypto bulls expected.

The favorite argument for bitcoin was that it protects against inflation. This year gave it the perfect test: an oil shock from the war in Iran, rising consumer prices and central banks forced to react. Bitcoin did not act as a hedge. It acted like a bet on interest rates.

A Year Under the Peak

The path since the record, investingLive notes, has been a long slide followed by an extended sideways stretch, not a collapse. Bitcoin has recovered about 8% over the past month and gained roughly 3% last week, briefly touching $87,000.

Several forces explain the gap. The past year brought energy-price pressure, a renewed cycle of rate hikes by major central banks and a sharp rise in borrowing costs. The US 10-year Treasury yield climbed to around 5.3% last week, a multi-decade high, according to investingLive, a point where the pressure on risk assets is easy to see.

Why Yields Matter More Than Inflation

Bitcoin pays no interest and produces no cash flow. When a government bond offers more than 5% with little risk, the cost of holding something that pays nothing goes up. That is the opportunity-cost argument, and it fits this year's pattern better than the inflation-hedge story.

The comparison with gold supports the point. investingLive headlines this week describe gold breaking key support and sliding below $4,230. If both of the supposed inflation hedges are weak while inflation is rising, the common factor is the bond market, which has been selling off. Blogerroom covered the weak Treasury auction that pushed yields to near 20-year highs, and the oil side of that story in its report on the US rejection of Iran's Hormuz terms.

What the Jobs Report Did

Last week showed the sensitivity clearly. US payrolls rose by only 29,000 in September, well short of the 84,000 economists expected, and markets cut the odds of an October Federal Reserve rate hike from about 70% to below 20%, investingLive reported. Bitcoin rose on the news. Blogerroom covered the jobs report and why the reaction may be too quick.

A cryptocurrency that rallies on bad economic news, because it lowers the chance of a rate hike, is behaving like a long-duration growth stock. That is hard to square with the idea of an alternative to the financial system.

A Rally Without Much Conviction

The quality of the move is mixed. Inflows into US spot bitcoin exchange-traded funds slowed sharply last week. investingLive put the figure at around $80 million, down from about $2.4 billion the week before. Other trackers differ: FXStreet, citing SoSoValue, reported $241.09 million for the week ending Oct. 2, the third straight week of inflows. The tallies depend on the tracker and the dates counted, but every version shows a clear drop from the prior week's record.

Leverage is also light. Futures open interest sits near its lowest of the year and funding rates on perpetual contracts have normalized, investingLive said. That reduces the risk of a forced-selling cascade, but it also means the latest gains rest on little conviction.

The Bull Case, and Its Limits

Some analysts see room to climb. Citigroup raised its 12-month bitcoin target to $113,000 from $82,000 on Oct. 1, according to coverage of the note. Technical traders point out that the 50-, 100- and 200-day moving averages are heading toward their first fully bullish alignment since 2025.

My view: a bank price target and chart patterns are weak evidence next to the bond market. Citigroup's earlier $82,000 target was nearly where bitcoin trades today, which is a reminder of how quickly such forecasts follow price. If yields keep rising, a moving average will not save the rally.

What to Watch

The next test is Wednesday's release of the minutes from the Fed's latest meeting, which should show how divided officials were about another hike. Oil is a swing factor too: investingLive notes another leg higher in crude would revive inflation and rate-hike fears, historically a headwind for bitcoin. After that, the next jobs report on Nov. 6 and the Fed's late-October meeting will matter more than anything happening on a crypto exchange.

Cryptocurrencies are volatile and can lose a large share of their value quickly. This article is general information, not investment advice.