Hotter-Than-Expected CPI Weighs on Crypto as Traders Brace for Delayed Fed Cuts

Bitcoin declined 4% in a 24-hour period, while Ethereum lost approximately 6.5% as rising U.S. inflation and a sell-off in technology shares weighed on global risk assets. The downturn has reignited debate over Bitcoin’s role in uncertain markets, particularly whether it acts as a speculative investment rather than a reliable hedge when interest rates and borrowing costs become more important.

September’s Consumer Price Index (CPI) climbed 0.6% from the previous month and 3.7% compared with a year earlier. Core CPI, which excludes food and energy, increased 0.3% monthly and 2.6% annually. Gasoline prices rose sharply by 9.1%, accounting for more than half of the monthly increase in headline inflation.

The latest inflation figures revived speculation about a possible Federal Reserve rate hike ahead of its October 27–28 meeting. CME FedWatch briefly placed the probability of a rate increase on October 28 at 31.6%, up from 22.1% the previous day. Subsequent pricing shifted toward a 75% likelihood that the central bank would keep interest rates unchanged.

The changing outlook for monetary policy put pressure on cryptocurrencies because interest rates influence market liquidity, financing expenses and demand for investments tied to future growth. Bitcoin’s reaction to inflation data and its ability to defend nearby support levels had already been major talking points among traders.

The sell-off also spread across U.S. equities. The S&P 500 declined 1.1%, while the Nasdaq Composite fell 1.9%. Semiconductor stocks extended their losing streak to six consecutive sessions, reflecting mounting pressure on the technology sector.

Asian markets recorded substantial losses as well. South Korea’s KOSPI tumbled 8%, while Japan’s Nikkei 225 dropped 4.8%. Samsung Electronics fell 9.3%, SK Hynix and Kioxia each lost more than 11%, and SoftBank shares declined 9.4%.

Why Is Crypto Down Today?

Bitcoin fell 4% as hotter U.S. inflation heightened concerns about a potential Federal Reserve rate increase, prompting investors to cut exposure to cryptocurrencies and other risk-sensitive investments.

AI-related companies such as Oracle and CoreWeave also came under pressure as investors reconsidered how higher financing costs could affect capital-intensive businesses. Technology supply-chain shares faced heavy selling, while Ethereum’s larger decline compared with Bitcoin indicated greater weakness among more volatile digital assets.

The market moves suggest that inflation was the primary catalyst behind the broader decline. Higher-than-expected price growth temporarily increased rate-hike expectations, encouraging investors to reduce holdings in technology stocks and other assets sensitive to financial conditions. Saxo Bank strategist Charu Chanana described the equity sell-off as a reassessment of capital costs, as investors questioned the valuations of AI companies amid expensive and unpredictable borrowing conditions.

JPMorgan analysts also pointed to funding pressures and IPO schedules as important challenges for the AI investment theme. These concerns help explain the weakness in AI-related stocks. For cryptocurrencies, the inflation surprise contributed to a wider retreat from risk assets as traders reassessed the Federal Reserve’s likely policy direction.

The bond market offered a contrasting signal. The 10-year U.S. Treasury yield fell 7.8 basis points to 5.110% as investors moved into government bonds during the equity sell-off. Reuters attributed the decline to safe-haven demand and concerns about slowing economic growth. This indicates that investors were balancing inflation risks against the possibility of weaker economic activity, rather than uniformly pricing in higher yields.

Markets are now awaiting speeches from Federal Reserve officials, U.S. producer price data and retail sales figures for further guidance on monetary policy. If incoming data or central bank commentary increases the perceived likelihood of an October rate hike, technology stocks and higher-beta cryptocurrencies could remain under pressure.

On the other hand, if the probability of rates remaining unchanged holds near 75%, investors may turn their attention to a potential stabilization in technology shares and a Bitcoin recovery from around $80,764.

Taiwan Semiconductor Manufacturing Company’s third-quarter earnings, scheduled for later in Thursday’s Asian trading session, will offer another indication of confidence in the AI hardware sector. The Federal Reserve’s October 27–28 meeting remains the main upcoming policy event that could influence interest-rate expectations and the direction of cryptocurrency markets.