In brief
- U.S. consumer prices rose 0.4% in October, versus expectations of 0.3%, while core inflation climbed 0.3%, also topping forecasts.
- Bitcoin briefly slid to around $73,525 after the announcement, and about $178 million in leveraged crypto long positions were liquidated within an hour.
- Fed Governor Christopher Waller said a 50-basis-point rate hike in December could be considered, pushing market odds of such a move to nearly 15%.
Bitcoin dropped below $74,000 on Tuesday after U.S. inflation ran hotter than expected for a third month in a row, putting further pressure on a crypto market already grappling with falling prices and investor withdrawals.
The Consumer Price Index rose 0.4% in October, exceeding economists' forecasts of 0.3%, according to data from the Bureau of Labor Statistics. Core CPI, which excludes food and energy prices, increased 0.3%, compared with expectations of 0.2%, matching September's reading for the third month in a row.
Headline inflation slowed from September's 0.6% increase, but traders who had expected a sharper slowdown took little comfort from that. Both figures were 0.1 percentage points above forecasts, giving the Federal Reserve another reason to maintain elevated interest rates.
Bitcoin was near $74,200 before the announcement and briefly fell to about $73,525 afterward. It regained some ground, approaching $74,000, but remained under pressure, down roughly 1% over 24 hours.
Ethereum also weakened, falling toward $2,040 in the initial selloff, as other major altcoins came under selling pressure. Around $178 million in crypto long positions were liquidated within an hour of the announcement.
Exchanges liquidate positions when traders use borrowed funds and no longer have enough collateral to cover possible losses. These forced sales can drive prices down further and trigger more liquidations.
Bitcoin had already been having a tough week. It had fallen about 4.5% over seven days, while U.S. spot Bitcoin ETFs saw another $201 million in net withdrawals on Monday, adding to selling pressure ahead of the inflation report.
Why the CPI report matters for crypto
Higher inflation generally leads to higher interest rates, which tend to weigh on crypto. When government bonds and cash offer attractive returns, investors have less reason to hold volatile assets such as Bitcoin, which pays no interest simply for being held.
Higher borrowing costs also make cheap funding for speculative investments less available. As a result, Bitcoin often falls when inflation data points to the Fed tightening monetary policy, despite its reputation as an inflation hedge.
The latest report came just hours after Fed Governor Christopher Waller delivered unusually hawkish remarks about the central bank's next move.
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 core CPI reading of 0.3% could warrant a larger move.
“I believe a 50 basis point hike in the policy rate should be considered at the December meeting,” he said.
October's reading landed exactly at that threshold. According to Reuters, financial analysts raised their estimated odds of a 50-basis-point hike to nearly 15% by midmorning, though a smaller quarter-point increase remained the clear favorite.
The Fed currently sets its benchmark interest rate at between 3.75% and 4%. A 50-basis-point increase would bring the range to 4.25%-4.50%, raising borrowing costs across the economy.
Bond markets responded accordingly. The two-year Treasury yield, which closely reflects expectations for Fed policy, recorded its largest increase since April 2025, while the dollar strengthened and U.S. stocks opened lower.
Inflation is slowing, not receding
October's inflation report painted a mixed picture of the U.S. economy. Food prices rose 0.5%, energy prices increased 0.7%, and shelter costs climbed 0.3%, making up more than 30% of the monthly rise in headline inflation.
Energy inflation eased considerably from September's 5.2% surge, but prices continued to rise broadly across services. Recreation costs increased 0.8%, motor vehicle insurance rose 0.7%, and medical care climbed 0.3%.
The report also had an unusual limitation: The government did not release its standard annual inflation rate because the 2025 federal shutdown prevented the collection of October data that year. The last available annual headline figure, for September, was 3.7%, well above the Fed's 2% inflation target. The target is formally measured using a separate index, Personal Consumption Expenditures.
Crypto investors have seen a similar pattern before. Bitcoin fell in October after September's hotter-than-expected inflation report, and the selloff continued as expectations for rate hikes grew.
This time, Bitcoin is entering the next Fed meeting well below its October levels, while institutional demand is showing signs of weakness. Higher Treasury yields could make a sustained recovery harder unless inflation cools or investors' appetite for risk returns.
The Fed's final policy meeting of 2026 is scheduled for December 8-9. The next CPI report is due December 10, so policymakers will have to make their December rate decision without November's consumer inflation figures.
Source: decrypt.co. Adapted by NBTC.
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