Bitcoin Plunges Below $83K as US Inflation Roars: Market Tremors
Bitcoin's price declined after September's U.S. consumer price data showed higher-than-expected inflation, driven by rising gasoline costs. This 'sticky inflation' is prompting the Federal Reserve to consider higher interest rates, which historically impacts cryptocurrencies and other 'risk-on' assets.
Bitcoin experienced a notable price slide on Wednesday, following the release of U.S. consumer price data for September, which indicated that inflation rose more than anticipated, primarily driven by increasing gasoline prices. The leading cryptocurrency by market capitalization was recently trading near $82,827, marking a nearly 1% drop over a 24-hour period. Earlier on Wednesday morning in New York, Bitcoin's price dipped as low as approximately $82,331. Over the past seven days, the digital coin's value has declined by more than 1%.
This recent downturn comes after Bitcoin had enjoyed its best quarter in years, demonstrating a strong rally throughout August and September, which led many analysts to suggest it had exited a bear market. However, the persistence of 'sticky inflation' continues to exert short-term pressure on the cryptocurrency's price.
The data released by the Labor Department’s Bureau of Labor Statistics on Wednesday revealed that the Consumer Price Index (CPI) increased by 0.6% in September, following a 0.4% rise in August. On an annual basis, the CPI advanced by 3.7% in the 12 months through September, an acceleration from the 3.4% increase recorded in August.
Elevated prices in the U.S. have prompted the Federal Reserve to signal its intention to maintain higher interest rates for an extended period. The central bank reiterated in September that combating inflation was its paramount objective and proceeded with an interest rate hike. Bitcoin's price has historically shown sensitivity to interest rate increases, as higher borrowing costs tend to constrain the liquidity necessary for the functioning of digital coins, much like other 'risk-on' assets such as stocks.
Despite the Federal Reserve's firm stance on inflation, Bitcoin's price managed to rise in September. The market is now looking ahead to October 28, when the central bank is scheduled to announce its next decision regarding interest rates. As of Wednesday, fed funds futures were pricing in a 47% probability of an interest rate hike at the Fed’s October meeting, according to CME Group’s FedWatch tool.