Bitcoin Tumbles to One-Month Low as Hot Inflation Data Fuels Fed Rate Hike Bets

Bitcoin prices fell to a near one-month low on Thursday, extending overnight losses after U.S. consumer inflation data came in higher than anticipated, bolstering bets that the Federal Reserve will raise interest rates again before the end of the year.

Inflation Data Spooks Markets

The sell-off in digital assets was triggered by a U.S. report showing the Consumer Price Index (CPI) for September rose more than markets expected. The data suggested that rising energy costs are feeding into the broader economy, complicating the Federal Reserve's efforts to control inflation.

Following the report, traders increased their wagers on further monetary tightening. The probability of the Fed implementing another 25-basis-point rate hike in December now stands at 70%, according to the CME FedWatch Tool. Higher interest rates are typically a headwind for speculative, non-yielding assets like Bitcoin, as they increase the appeal of safer investments such as bonds.

Broad Sell-Off and Liquidations

The hotter-than-expected inflation reading prompted a wider risk-off sentiment across financial markets, hitting technology stocks and extending to cryptocurrencies. By 9:19 AM ET, Bitcoin was trading down 2.3% at $80,506.4, its lowest point in almost a month.

Ad

The downturn was accompanied by significant capital flight and leveraged position unwinds:

• Spot Bitcoin exchange-traded funds (ETFs) saw net outflows of $261.5 million on Wednesday, according to data from SoSoValue.
• Over the past 24 hours, the crypto market saw total liquidations of $966.2 million, with the vast majority being bullish long positions, as reported by Coinglass.

Altcoins Follow Bitcoin Lower

The negative sentiment permeated the broader cryptocurrency market, with major alternative coins, or altcoins, posting significant losses. The prospect of a prolonged high-interest-rate environment continues to weigh on the valuation of digital assets.

Ether, the second-largest cryptocurrency, dropped 4.4% to $2,347.53. Other major tokens also declined, with XRP falling 4%, Solana down 3.3%, and Cardano losing more than 4%. BNB, the native token of the Binance exchange, slid 2.5%.