Bitcoin extended overnight losses on Thursday after U.S. consumer price index data for September came in hotter than consensus, driving renewed bets that the Federal Reserve will deliver another interest-rate increase before year-end. By 01:49 ET (05:49 GMT), the largest digital asset was down 3.2%, trading at $80,791.4 and nearing its weakest level since September 20.
The inflation release showed an uptick in core inflation as rising energy prices fed into broader consumer costs. That pattern heightened concern among investors that the Fed could raise borrowing costs again - a development that typically weighs on speculative assets such as cryptocurrencies.
Market gauges reflected an elevated probability that the central bank will implement a 25 basis-point rate rise in December, following a similar increase in September. At the same time, traders largely maintained expectations that policymakers would hold rates steady in October, according to CME FedWatch indicators referenced in market commentary.
The CPI surprise also coincided with a pronounced pullback in global technology and artificial intelligence equities. Investors repriced future earnings for the sector in light of higher rates, prompting a broader risk-off response across financial markets that spilled into crypto trading.
Capital flows into spot Bitcoin exchange-traded funds turned negative on Wednesday after the CPI data, with flow-tracking showing an outflow of $261.5 million. In parallel, data from derivatives platforms recorded sizeable liquidations in the crypto market - a total of $966.2 million across positions over the prior 24 hours, with a majority of those liquidated positions being long bets.
That combination of ETF outflows and forced unwinds added to selling pressure on Bitcoin and wider market sentiment.
Altcoins followed Bitcoin lower as rate-hike expectations weighed on speculative assets. Ethereum - the second-largest crypto by market value - fell 5.7% to $2,360.53, while XRP declined 4.7%. Other major tokens posted notable losses: Solana slipped 4.8%, Cardano dropped 6%, and BNB gave up 3.5%.
Memecoins also suffered in the sell-off, with Dogecoin down 5.6% and the token $TRUMP off about 7%.
The recent moves underscore how sensitive crypto valuations remain to shifts in real yields and monetary policy expectations. Rising interest rates tend to redirect capital toward higher-yielding, lower-risk instruments, reducing the pool of funds available for speculative investments. In this episode, both spot ETF flows and leveraged derivatives positions amplified the market response to the CPI surprise.
Investors and market participants are likely to monitor upcoming economic data and Fed communication closely for signals on the timing and extent of any further tightening, given its direct implications for risk assets and longer-duration valuations.