Driven by stronger-than-expected U.S. inflation data and expectations that the Federal Reserve may raise interest rates further, the cryptocurrency market broadly declined on Tuesday, with Bitcoin dropping to its lowest level in about three months.
As concerns about continued tightening of U.S. monetary policy intensify, investors' appetite for risk assets such as cryptocurrencies has weakened further.
Market data showed that Bitcoin fell as much as 3% during intraday trading, touching $72,695, bringing its year-to-date decline to about 17%.
Other cryptocurrencies with higher volatility posted even sharper losses, with Ethereum and XRP both falling more than 5%, while Zcash plunged about 14%.
The selloff dealt another blow to optimistic investors in the cryptocurrency market. Although several favorable factors that had previously supported Bitcoin's mainstream adoption remain in place, including a relatively friendly regulatory environment, Wall Street's increasingly sophisticated cryptocurrency investment infrastructure, and investors' continued pursuit of speculative returns from digital assets, these factors have still failed to prevent the market from continuing to weaken.
At the same time, security risks within the cryptocurrency industry itself are also undermining investor confidence. Last month, Binance suffered a hack involving $6.3 billion in assets, further heightening market concerns about the security of digital assets and industry risks.
The direct trigger for this round of selling was the latest U.S. inflation data. Data released on Tuesday showed that the U.S. core consumer price index (CPI), which excludes food and energy, rose 0.3% month over month in October, marking the third consecutive month above market expectations; the overall CPI rose 0.4% month over month, reflecting widespread increases in the prices of daily necessities.
Persistently stubborn inflation has led the market to reassess the Federal Reserve's future interest rate path. Several Fed officials have warned that a one-time 50 basis point rate hike may be needed in December to curb price increases. Meanwhile, money markets have further increased bets that the Fed will raise rates at least twice before mid-2027.
Jeff Anderson, head of U.S. operations at digital asset trading firm STS Digital, said: "Unfortunately for the market, the inflation problem appears to be broader and more stubborn than we had hoped." He noted that market pricing for the scale of monetary tightening in December has risen from 20 basis points to 27 basis points. For risk appetite that was already fragile, further tightening of financial conditions is undoubtedly unfavorable news.
Lewis Huang, an analyst at cryptocurrency exchange Bitget, said that rising U.S. Treasury yields and a stronger dollar could further intensify Bitcoin's recent selling pressure. He specifically pointed out that Bitcoin's 200-day moving average at around $73,200 is a key technical level worth watching. Huang believes that if Bitcoin continues to fall below this level, it could signal a risk of a further deep correction in the market.
The weakness in the cryptocurrency market has also spread to related U.S. equity sectors. Strategy (MSTR.US), which holds a large amount of Bitcoin, fell 3.6%; Coinbase (COIN.US), a major U.S. cryptocurrency trading platform, dropped 2.9%; and stablecoin issuer Circle (CRCL.US) fell 3.8%.
Overall, although an improved regulatory environment and greater institutional investor participation provide long-term support for the cryptocurrency market, against the backdrop of persistently high U.S. inflation and rising expectations of Fed rate hikes, macroeconomic factors are once again dominating digital asset price movements. As Bitcoin approaches a key technical support level, the market will closely monitor future Fed policy signals and whether risk assets face further selling pressure.
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