Bitcoin Slips Below $74,000 as Stronger US Inflation Raises Prospect of Larger Fed Rate Increase
Bitcoin dropped below $74,000 on Tuesday after U.S. inflation exceeded expectations for the third month in a row. The data added further strain to a cryptocurrency market already facing declining prices and investor outflows.
Figures published by the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) increased 0.4% in October, higher than economists' 0.3% estimate. Core CPI, which excludes food and energy, rose 0.3% compared with expectations for a 0.2% increase. That matched September's figure and marked the third consecutive month at that level.
Overall inflation had eased from September's 0.6% rise, but the slowdown was smaller than traders had anticipated and therefore provided little comfort. Both the headline and core figures came in 0.1 percentage points above forecasts, strengthening the case for the Federal Reserve to maintain elevated interest rates.
BTC Hits November Lows
Bitcoin was changing hands at around $74,200 before the figures were announced, then briefly fell to approximately $73,525 immediately after their release. It subsequently recovered some of the decline toward $74,000, but remained under pressure and was down about 1% over the previous 24 hours.
Ethereum also weakened, falling toward $2,040 during the initial market reaction, while other leading altcoins came under selling pressure. Within an hour of the announcement, approximately $178 million in crypto long positions had been liquidated.
Liquidations occur when exchanges automatically shut down leveraged positions funded with borrowed money because traders no longer have sufficient collateral to cover possible losses. These forced sales can add to downward price pressure and set off additional liquidations.
Bitcoin had already been going through a difficult week. It had fallen approximately 4.5% over the preceding seven days, while U.S. spot Bitcoin exchange-traded funds (ETFs) saw a further $201 million in net outflows on Monday. Those withdrawals added to the selling pressure that had built up before the inflation figures were published.
Why the CPI Report Matters for Crypto
Rising inflation generally increases the likelihood of higher interest rates, a development that tends to weigh on cryptocurrencies. When government bonds and cash provide appealing returns, investors have less reason to hold volatile assets such as Bitcoin, which do not pay interest simply for being held.
More expensive borrowing also makes low-cost funding less accessible for speculative investments. As a result, Bitcoin often declines when inflation figures point to a more restrictive Federal Reserve policy, despite its reputation as a potential hedge against inflation.
The latest inflation figures were released only hours after Federal Reserve Governor Christopher Waller made unusually hawkish remarks about the central bank's next policy decision.
Speaking in London, Waller said he would back a quarter-percentage-point interest rate increase in December even if inflation improved. He cautioned, however, that another 0.3% reading for core CPI could warrant a larger increase.
“I believe a 50 basis point hike in the policy rate should be considered at the December meeting,” he said.
October's core inflation figure came in exactly at that level. Reuters reported that by midmorning, financial analysts had raised their estimated probability of a 50-basis-point increase to nearly 15%. A smaller quarter-point increase, however, remained by far the most likely outcome.
For comparison, the Fed's benchmark interest rate currently stands in a range of 3.75% to 4%. A 50-basis-point increase would move that range to 4.25%-4.50%, raising borrowing costs throughout the economy.
Bond markets responded to the data and Waller's comments. The yield on the two-year U.S. Treasury note, which closely reflects expectations for Federal Reserve policy, recorded its largest increase since April 2025. The dollar strengthened, while U.S. stocks opened lower.
Inflation Is Easing, Not Disappearing
October's figures presented a mixed picture of the U.S. economy. Food prices rose 0.5%, energy prices increased 0.7%, and shelter costs advanced 0.3%. Shelter alone accounted for more than 30% of the monthly increase in headline inflation.
Energy inflation slowed sharply from September's 5.2% jump, but price increases continued across a broad range of services. Recreation costs rose 0.8%, motor vehicle insurance increased 0.7%, and medical care prices climbed 0.3%.
The report also had an unusual data limitation. The government did not release its standard annual inflation rate because the 2025 federal shutdown had prevented October data from being collected that year. The most recent available annual headline inflation reading was September's 3.7%, significantly above the Fed's 2% target. The central bank formally measures that target using a different gauge, the Personal Consumption Expenditures (PCE) price index.
Crypto investors have encountered a similar pattern before. Bitcoin fell in October after September's inflation report came in hotter than expected, and the decline continued as expectations for interest rate increases grew stronger.
This time, Bitcoin is heading toward the next Fed meeting at a level well below its October price, while signs point to weakening institutional demand. Higher Treasury yields may make a lasting recovery more challenging unless inflation cools or investors become more willing to take risks.
The Federal Reserve's final policy meeting of 2026 is scheduled for December 8-9. The next CPI report is due on December 10, so policymakers will have to decide on December rates without having November's consumer inflation data available.