Bitcoin experienced a significant downturn after rising inflation statistics in the United States triggered market concerns of impending interest rate hikes by the Federal Reserve. Initially climbing close to $84,000, the cryptocurrency’s value sharply declined, settling below $81,000, marking a 2.6% drop over the past 24 hours.
Core Inflation Sparks Rate Hike Concerns
The latest U.S. core inflation data, excluding volatile food and energy costs, reported an unexpected increase of 2.6%. This figure exceeded analysts’ expectations of 2.5%, augmenting market predictions of a more aggressive monetary policy from the Federal Reserve. In response, the dollar strengthened, while riskier assets like Bitcoin suffered.
As one of the world’s most influential central banks, the Federal Reserve’s policies significantly impact global liquidity conditions. Its forthcoming meeting on October 27-28 is anticipated to be pivotal in shaping future monetary directives.
Core inflation exceeding expectations at 2.6% refocused attention on the possibility of interest rate hikes, permeating market sentiment.
AI Stock Pressure Compounds Crypto Weakness
The fragility in cryptocurrency markets was compounded by a selloff in technology stocks, notably within the artificial intelligence sector. Futures tied to the Nasdaq 100 fell by 1.2%, as diminished optimism concerning AI growth curtailed risk appetite. This scenario magnified already-existing vulnerabilities within the crypto landscape.
Tech company Anthropic reported its third-quarter revenues reached $16.8 billion, yet this report pointed toward a deceleration in growth velocity. The downturn in AI-linked stocks also adversely impacted broader tech industry perceptions.
Broader Crypto Setbacks Intensify
The downturn was not confined to Bitcoin. ZEC experienced a dramatic 11% plunge to approximately $1,100, among the most substantial losses of the day. Ether also dropped by 5%, trading near $2,370. The retreat was particularly pronounced in altcoins, amplifying the overall market’s vulnerability.
On an institutional front, outflows persisted. Data from SoSoValue indicated a net withdrawal of $261 million from U.S. spot Bitcoin ETFs on Wednesday. These ETFs are critical indicators of institutional demand, as they directly hold Bitcoin.
The $261 million net outflow from U.S. spot Bitcoin ETFs in a single day underscored that price pressures are not solely stemming from futures markets.
The market is closely monitoring the short-term $80,400 level. If Bitcoin closes below this threshold, it may indicate a weakening of the support zone maintained by buyers since last Thursday.
