Bitcoin dropped 4% within 24 hours, while Ethereum slid approximately 6.5% as rising U.S. inflation and a broad technology-stock sell-off dampened investor appetite for risk. The decline has once again raised questions about Bitcoin’s behavior during periods of monetary uncertainty, particularly whether it functions more like a risk-sensitive asset than a hedge when interest rates and borrowing costs rise.
U.S. inflation accelerated in September, with the Consumer Price Index (CPI) increasing 0.6% from August and 3.7% compared with a year earlier. Core CPI, which excludes food and energy, rose 0.3% month over month and 2.6% annually. Meanwhile, gasoline prices jumped 9.1%, accounting for more than half of the monthly increase in headline inflation.
The stronger inflation figures prompted traders to reconsider the possibility of another Federal Reserve rate hike at the October 27–28 policy meeting. CME FedWatch briefly showed a 31.6% probability of a rate increase on October 28, compared with 22.1% the previous day. Subsequent market pricing shifted toward a 75% probability that the central bank would maintain its current rates.
These changing expectations weighed on cryptocurrencies because interest rates influence liquidity, financing costs and demand for investments dependent on future growth. Bitcoin’s sensitivity to inflation announcements and its ability to hold nearby support levels had already been key concerns among market participants.
The pressure extended to U.S. equities, with the S&P 500 falling 1.1% and the Nasdaq Composite losing 1.9%. Semiconductor stocks continued their decline for a sixth consecutive session, reflecting broader weakness across the technology sector.
Asian markets recorded even sharper losses. South Korea’s KOSPI plunged 8%, while Japan’s Nikkei 225 dropped 4.8%. Samsung Electronics fell 9.3%, SK Hynix and Kioxia each declined more than 11%, and SoftBank shares lost 9.4%.
Why Is Crypto Down Today?
Bitcoin declined 4% as hotter-than-expected U.S. inflation strengthened concerns about potential Federal Reserve rate increases. The resulting risk-off sentiment spread across cryptocurrency markets, technology shares and other growth-oriented investments.
AI-related companies, including Oracle and CoreWeave, also came under pressure as investors reassessed the impact of higher borrowing costs on capital-intensive businesses. Technology supply-chain stocks faced significant selling, while Ethereum’s steeper losses compared with Bitcoin highlighted the vulnerability of higher-beta digital assets during periods of market stress.
The broader sell-off followed a clear macroeconomic sequence: inflation accelerated, the perceived likelihood of a rate hike temporarily increased, and investors reduced their exposure to risk-sensitive assets. Saxo Bank strategist Charu Chanana described the equity market reaction as a reassessment of capital costs, with investors reconsidering AI valuations amid elevated and unpredictable borrowing expenses.
JPMorgan analysts similarly identified financing challenges and IPO schedules as important risks for the artificial intelligence investment theme. These concerns help explain the weakness in AI-linked equities. For cryptocurrencies, the inflation surprise appears to have reinforced a wider retreat from risk assets as monetary policy returned to the forefront of market concerns.
The bond market presented a more complicated picture. The 10-year U.S. Treasury yield declined 7.8 basis points to 5.110% as investors sought government bonds during the equity sell-off. Reuters attributed the move to safe-haven demand and weakening growth expectations. This suggests the market reaction reflected concerns about the economic outlook rather than a uniform shift toward higher yields across financial assets.
Investors are now monitoring Federal Reserve officials’ speeches, U.S. producer price figures and retail sales data for further clues about the direction of monetary policy. Additional evidence of persistent inflation or more hawkish central bank commentary could revive rate-hike expectations, potentially extending losses in technology stocks and more volatile cryptocurrencies.
If expectations of unchanged interest rates remain near the reported 75% probability, market attention could shift toward whether technology stocks stabilize and Bitcoin rebounds 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 confidence in the AI hardware sector. The Federal Reserve’s October 27–28 meeting, however, remains the primary upcoming event likely to shape expectations for interest rates and broader risk-asset performance.
