Bitcoin Slips Below $83,000 After Hotter-Than-Expected US Inflation Data
Key Takeaways
- •Bitcoin traded near $82,827 on Wednesday, down almost 1% over 24 hours and more than 1% over the past week, after U.S. inflation data came in hotter than expected.
- •The Consumer Price Index climbed 0.6% in September, up from 0.4% in August, and rose 3.7% over the 12 months through September versus 3.4% previously, with gasoline costs a major driver.
- •Bitcoin had posted its best quarter in years after rallying through August and September, prompting many analysts to declare an end to the bear market.
- •The Federal Reserve stated in September that taming inflation was its top priority and raised interest rates, while hinting rates could remain elevated for longer.
- •Fed funds futures were pricing a 47% chance of a rate hike at the Fed's October 28 meeting, leaving the decision finely balanced just below even odds.
Bitcoin's price slid on Wednesday after U.S. government data showed consumer prices rose more than expected in September, driven higher largely by gasoline costs.
The largest cryptocurrency by market capitalization was recently trading near $82,827, down almost 1% over a 24-hour period. At one point during Wednesday morning trading in New York, bitcoin fell to nearly $82,331. Over the past seven days, the asset has dropped by more than 1%.
The dip follows a strong stretch for the leading cryptocurrency. Bitcoin posted its best quarter in years after rallying through August and September, prompting many analysts to declare that it had exited a bear market. Sticky inflation, however, continues to weigh on the asset in the short term.
According to data released Wednesday by the Labor Department's Bureau of Labor Statistics, the Consumer Price Index climbed 0.6% in September, up from a 0.4% gain in August. In the 12 months through September, the CPI advanced 3.7%, accelerating from 3.4% in August. The monthly report is one of the most closely tracked gauges of U.S. inflation and a key input into market expectations for Federal Reserve policy.
Persistently high U.S. prices — spurred in part by the Trump Administration's decision this year to attack Iran with Israel — have led the Federal Reserve to hint that it may keep interest rates higher for longer. In September, the central bank said bringing inflation down was its number one priority and hiked rates.
Bitcoin's price has been sensitive to interest rate increases because higher borrowing costs restrict the liquidity the digital coin needs to run — along with other “risk-on” assets such as stocks. Even so, bitcoin's price rose in September despite the Federal Reserve talking tough on inflation.
The central bank will announce its next interest rate decision on October 28. As of Wednesday, fed funds futures were pricing a 47% chance of a rate hike at the Fed's October meeting, according to CME Group's FedWatch tool. That figure places the odds just under even, meaning futures markets see the Fed standing pat as the marginally more likely outcome and leaving the decision finely balanced heading into the announcement.
This article first appeared on Bitcoin Magazine and was written by Mathew Di Salvo.
