Bitcoin dropped 4% in 24 hours, while Ethereum declined approximately 6.5%, as stronger-than-expected U.S. inflation and a sell-off in technology stocks weighed on risk-sensitive assets. The downturn revived a familiar question for investors: when interest rates and borrowing costs become a concern, does Bitcoin behave more like a high-risk growth asset than a safe-haven investment?
The Consumer Price Index (CPI) for September climbed 0.6% month over month and 3.7% compared with the same period last year. Core CPI, which excludes food and energy, rose 0.3% monthly and 2.6% annually. Gasoline prices surged 9.1%, contributing more than half of the overall monthly increase in inflation.
The hotter inflation figures revived speculation about a potential Federal Reserve rate hike ahead of its October 27–28 meeting. CME FedWatch data briefly indicated a 31.6% probability of a hike on October 28, up from 22.1% the previous day. However, subsequent pricing showed a 75% probability that the central bank would leave rates unchanged.
The shift in rate expectations had a significant impact on crypto markets because monetary policy influences financing costs and investors’ willingness to hold assets whose valuations rely heavily on future growth. Bitcoin’s reaction to inflation data and its nearby technical support levels had already been a subject of market discussion before the latest decline.
U.S. stock markets also moved lower alongside cryptocurrencies. The S&P 500 dropped 1.1%, while the Nasdaq Composite fell 1.9%. A semiconductor-stock index extended its losing streak to six consecutive sessions.
Asian markets experienced even steeper losses. South Korea’s KOSPI plunged 8%, while Japan’s Nikkei 225 declined 4.8%. Samsung Electronics shares dropped 9.3%, SK Hynix and Kioxia each lost more than 11%, and SoftBank fell 9.4%.
Why Is Crypto Down Today?
Bitcoin fell 4% as stronger U.S. inflation data increased concerns about potential Federal Reserve rate hikes, triggering selling across cryptocurrency markets and technology stocks worldwide.
AI-related companies, including Oracle and CoreWeave, also faced pressure from concerns about higher borrowing costs, while technology supply-chain stocks experienced substantial losses. Ethereum’s steeper decline compared with Bitcoin reflected the relative weakness of more volatile crypto assets.
The broader market reaction points to a common macroeconomic driver: accelerating inflation briefly strengthened expectations of tighter monetary policy, prompting investors to reduce exposure to technology stocks and other risk-sensitive investments. Saxo Bank strategist Charu Chanana described the equity market reaction as a reassessment of capital costs, as investors reconsidered the valuations of AI-focused businesses in an environment of elevated and unpredictable borrowing expenses.
JPMorgan analysts also highlighted financing challenges and initial public offering timelines as important risks for the artificial intelligence investment theme. These concerns help explain the pressure on AI-linked equities. The broader interpretation is that the inflation surprise brought interest rates back into focus, contributing to a widespread risk-off move that also dragged down cryptocurrencies.
The bond market’s reaction, however, added another dimension to the sell-off. The 10-year U.S. Treasury yield dropped 7.8 basis points to 5.110% as investors moved into government bonds amid falling equity prices. Reuters attributed the move to safe-haven demand and weakening growth expectations. This suggests the session was not simply a broad repricing of assets in response to rising yields.
According to the market report, upcoming speeches by Federal Reserve officials, U.S. producer price data and retail sales figures were the next important events for investors to watch. If fresh economic data or comments from policymakers increase expectations of an October rate hike, AI-related stocks and higher-beta cryptocurrencies could face additional selling pressure.
Conversely, if the probability of the Fed keeping rates unchanged remains near 75%, investors may focus on whether technology shares can stabilize and whether Bitcoin can recover from around $80,764. Taiwan Semiconductor Manufacturing Company’s third-quarter earnings, scheduled for later in Thursday’s Asian trading session, will provide another test of investor confidence in the AI hardware sector. The Federal Reserve’s October 27–28 meeting remains the key upcoming event for monetary policy expectations.
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