Crypto Market Drops as U.S. Inflation Hits 3.7%, BTC Loses $82K

The crypto market declined on Wednesday, Oct. 14, after U.S. inflation exceeded economists’ expectations. Bitcoin fell below $82,000 as higher Treasury yields increased concerns about further monetary tightening.

The cryptocurrency market capitalization approached $2.75 trillion during the sell-off. Ethereum, XRP, and Solana also declined as investors reduced exposure to risk assets.

The latest inflation report showed stronger headline and core price pressures. Those figures increased uncertainty ahead of the Federal Reserve’s Oct. 27–28 policy meeting.

Crypto Market Drops as US Bond Yields Jump After US Inflation Data

Bitcoin and most altcoins were in the red today after the US released the September consumer inflation report. A report by the Bureau of Labor Statistics (BLS) showed that the headline consumer inflation rose 0.6% on a MoM basis. This increase translated to an annual jump of 3.7%, higher than the expected 3.6%.

Core inflation, which excludes volatile food and energy prices, rose from 2.4% in August to 2.6% in September, exceeding the expected 2.5%. These numbers mean that US inflation is moving in the wrong direction, which may push the Federal Reserve to hike interest rate as soon as this month.

The challenge, however, is that the current inflation is being caused by the ongoing crisis in the Middle East that continues to escalate. A rate hike will not stop the war, meaning that inflation will be stickier for longer.

These fears explain why US bond yields continued rising. The ten-year yield jumped to 5.24%, while the 30-year and 5-year metrics jumped to 5.5% and 5.05%, respectively. Analysts worry that these metrics will likely continue rising in the near term. In a recent statement, a top analyst at PIMCO warned that the ten-year will hit 6% for the first time since 2000.

Odds of Fed Hiking Interest Rates are Rising

Odds of the Federal Reserve hiking interest rate this year have continued rising on Polymarket and Kalshi. Data show that the probability of the Fed hiking rates this month rose to 37%, up from 87% in December.

The crypto market tends to underperform when the Fed hikes interest rates and bond yields rise. That’s because Bitcoin, like gold, is a non-yielding asset that tends to lag as investors move into bonds. This explains why gold has continued to underperform the market this month.

It also explains why American investors are starting to pare back their crypto ETF holdings. Spot Bitcoin ETFs have lost $278 million this month, a sharp reversal from what happened in the previous three months when these funds added over $6 billion in assets.

The same has happened among other crypto tokens. Spot Ethereum ETFs have shed over $695 million this month, while XRP funds added $12 million.

Bitcoin Price Technicals Point to a Retreat

The daily chart shows that Bitcoin peaked at $87,348 in September and then pulled back to the current $81,676. It has now slumped below the crucial support level of $82,750, its highest point in May this year. Dropping below that level confirmed the bearish outlook.

The token has moved below the 50-day moving average, while the two lines of the MACD have formed a bearish divergence. This pattern occurs when the indicator moves downward while the asset rises. The Relative Strength Index (RSI) has continued moving downwards.

Therefore, the path of least resistance is downward, with the initial target to watch at $80,400. This price target is about 23.6% Fibonacci Retracement level. If this happens, the broader crypto market will continue falling.

This article is for informational purposes only and does not constitute financial or investment advice.