In brief
- U.S. consumer prices rose 0.4% in October against expectations of 0.3%, while core inflation increased 0.3%, also exceeding forecasts.
- Bitcoin briefly fell to around $73,525 following the announcement, while approximately $178 million in leveraged crypto long positions were liquidated within an hour.
- Fed Governor Christopher Waller suggested a 50-basis-point December rate hike could be considered, with market odds of such a move rising to nearly 15%.
Bitcoin fell below $74,000 on Tuesday after U.S. inflation came in hotter than expected for the third consecutive month, adding fresh pressure to a crypto market already struggling with falling prices and investor withdrawals.
The Consumer Price Index rose 0.4% in October, above economists' forecasts of 0.3%, according to data released by the Bureau of Labor Statistics. Core CPI, which strips out food and energy prices, climbed 0.3% against expectations of 0.2%, matching September's reading for the third consecutive month.
Headline inflation actually slowed from September's 0.6% increase, but that offered little relief to traders who had expected a bigger slowdown. Both figures exceeded forecasts by 0.1 percentage points, giving the Federal Reserve another reason to keep interest rates elevated.
Bitcoin was trading near $74,200 before the announcement and briefly dropped to approximately $73,525 immediately afterward. The cryptocurrency recovered some ground toward $74,000 but remained under pressure, trading roughly 1% lower over 24 hours.
Ethereum also weakened, slipping toward $2,040 during the initial selloff, while other major altcoins faced selling pressure. Approximately $178 million in crypto long positions were liquidated within an hour of the announcement.
Liquidations happen when exchanges automatically close trades made with borrowed money because their owners no longer have enough collateral to cover potential losses. Those forced sales can push prices even lower, triggering further liquidations.
Bitcoin was already having a difficult week. The asset had lost roughly 4.5% over seven days, while U.S. spot Bitcoin ETFs recorded another $201 million in net withdrawals on Monday, extending the selling pressure that preceded the inflation report.
Why the CPI report matters for crypto
Higher inflation usually means higher interest rates, and higher interest rates tend to be bad news for crypto. When government bonds and cash offer attractive returns, investors have less incentive to hold volatile assets such as Bitcoin, which generate no interest simply by being held.
Higher borrowing costs also reduce the availability of cheap money for speculative investments. That's why Bitcoin, despite its reputation as an inflation hedge, frequently falls when inflation data suggests the Fed will tighten monetary policy.
The latest report landed just hours after Fed Governor Christopher Waller made unusually aggressive comments about the central bank's next move.
Speaking in London, Waller said he would support a quarter-percentage-point interest rate increase in December even if inflation improved. But he also warned that another core CPI reading of 0.3% could justify 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 hit precisely that threshold. According to Reuters, financial analysts increased their estimated probability of a 50-basis-point hike to nearly 15% by midmorning, although a smaller quarter-point increase remained the overwhelming favorite.
For context, the Fed currently holds its benchmark interest rate between 3.75% and 4%. A 50-basis-point increase would lift that range to 4.25%-4.50%, making borrowing more expensive across all of the economy.
Bond markets reacted accordingly. The two-year Treasury yield, which closely tracks expectations for Fed policy, posted its biggest increase since April 2025, while the dollar strengthened and U.S. stocks opened lower.
Inflation is slowing, not receding
October's inflation report offered a mixed picture of the American economy. Food prices rose 0.5%, energy increased 0.7%, and shelter costs climbed 0.3%, accounting for more than 30% of the monthly headline increase.
Energy inflation slowed considerably from September's 5.2% surge, but price increases remained widespread across services. Recreation costs climbed 0.8%, motor vehicle insurance rose 0.7%, and medical care increased 0.3%.
The report also came with an unusual limitation: The government did not publish its standard annual inflation rate because the 2025 federal shutdown prevented the collection of October data that year. September's last available annual headline reading stood at 3.7%, well above the Fed's 2% inflation target, which is formally measured using a separate index known as Personal Consumption Expenditures.
Crypto investors have seen this pattern before. In October, Bitcoin fell after September's hotter-than-expected inflation report, and the selloff continued as rate-hike expectations strengthened.
This time, the market enters the next Fed meeting with Bitcoin substantially below its October levels and institutional demand showing signs of weakness. Higher Treasury yields could make a sustained recovery more difficult unless inflation cools or investors regain their appetite for risk.
The Fed's final policy meeting of 2026 is scheduled for December 8-9. The next CPI report will arrive on December 10, meaning policymakers will have to make their December rate decision without seeing November's consumer inflation figures.
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