Bitcoin Retreats After Stronger-Than-Expected U.S. Inflation Rekindles Rate Hike Fears

Bitcoin slipped below $81,000 as stronger U.S. inflation data heightened concerns that the Federal Reserve might raise interest rates this month. Trading early Thursday showed BTC near $81,499.86, representing a roughly 1% decline since midnight UTC and a more than 2% fall over the past 24 hours.

Market action saw prices briefly approach $80,000 on Wednesday before a rebound toward $81,500 that has since largely faded during the Asian session. Other major tokens — including ether (ETH), XRP, and solana (SOL) — also fell, down between 3.5% and 4%. Notably, PYTH remained a standout among the top 100 cryptocurrencies, rising over 7%.

Inflation surprise and market repricing

Data released Wednesday showed consumer prices rose 3.7% year-over-year in September, up from 3.4% in August and above consensus estimates. Core CPI, which excludes food and energy, accelerated to 2.6% from 2.4% the prior month. The unexpected uptick prompted a rapid market reassessment of the Fed’s rate path.

Prediction tools captured the swing in expectations: Polymarket briefly priced the chance of an October hike at nearly 50% after the CPI print before easing to about 30%. Similarly, the CME FedWatch tool saw odds spike to almost 47% from roughly 22%, then settle around 26% at the time of reporting.

Industry reaction and liquidity concerns

Vikram Subburaj, CEO of exchange Giottus, said the hotter inflation reading has renewed doubts that rates could remain higher for longer, adding that institutional demand appears fragile. He pointed to U.S. spot Bitcoin ETF flows as an example: ETFs recorded $150.5 million in outflows on Oct. 14, reversing a $175.7 million inflow the previous day.

Market-maker STS Digital warned that the heightened uncertainty may undermine liquidity across asset classes. Anderson from STS Digital told CoinDesk the close call at the next FOMC meeting is “damaging liquidity and dampening risk appetite”. Still, he expects the Fed to hold rates this month, consistent with more than a 70% probability of a status-quo outcome priced into CME fed funds futures at the time of writing.

Overall, analysts noted that digital assets have become more sensitive to macroeconomic developments. Energy shocks, fixed-income volatility and shifts in AI-related valuations are all weighing on sentiment, contributing to the recent pullback in token prices.