Bitcoin fell below the $74,000 mark on Wednesday, weighed down by growing expectations that the U.S. Federal Reserve will raise interest rates again in the coming months to combat persistent inflation.
The largest cryptocurrency by market value slipped 1.2% to $73,935.0 by 00:56 ET (05:56 GMT), touching a three-month low in overnight trading. The move came as a stronger dollar and rising bond yields sapped appetite for riskier assets, while continued outflows from spot exchange-traded funds added further selling pressure.
Rate hike bets surge after CPI
Markets sharply increased their bets on a December rate hike after consumer price index data for October showed inflation running hotter than economists had expected. The print was accompanied by hawkish comments from two Federal Reserve officials, who advocated for higher rates to bring inflation under control.
According to CME Fedwatch, markets are now pricing in a nearly 89% chance that the Fed will raise rates by 25 basis points in December, with a small probability of a larger 50 basis point increase. The tool indicated that traders have largely reversed earlier wagers that the central bank would hold steady in December.
Higher interest rates tend to weigh on speculative assets like cryptocurrencies because they increase the opportunity cost of holding such investments relative to debt. Bitcoin has historically underperformed during periods of rising rates, as seen during the Fed's hiking cycle in 2022-2023.
Regulatory overhang adds to woes
The prospect of higher rates compounded Bitcoin's existing losses from last week, when Democrats secured majorities in both chambers of Congress during the midterm elections. Market participants fear that Democratic control will lead to greater regulatory scrutiny of the crypto industry, given the party's history of pushing for tighter anti-money laundering and risk management practices.
Uncertainty over the U.S. regulatory outlook has kept broader cryptocurrency markets on the back foot.
Altcoins retreat in tandem
Major altcoins largely followed Bitcoin lower on Wednesday. Ether, the second-largest cryptocurrency, dropped 2.4% to $2,066.29, while XRP fell 3.8%. Solana and Cardano declined 3.5% and 2.3%, respectively, and BNB slipped 1.4%.
Among meme-based tokens, Dogecoin lost 2.8%, while $TRUMP gained 0.4%.
The broad retreat underscores how macroeconomic factors and regulatory sentiment continue to drive price action across the digital asset space, with little sign of decoupling among major tokens.