Bitcoin fell 4% over 24 hours, while Ethereum dropped roughly 6.5% as accelerating U.S. inflation and widespread losses in technology stocks triggered a pullback across risk-sensitive markets. The decline has renewed debate over Bitcoin’s role during periods of economic uncertainty, particularly whether it behaves more like a speculative asset than a defensive hedge when interest rates and financing costs become major concerns.

September’s U.S. Consumer Price Index (CPI) rose 0.6% month over month and 3.7% year over year. Core inflation, which excludes food and energy, increased 0.3% from the previous month and 2.6% annually. Gasoline prices surged 9.1%, contributing more than half of the monthly rise in headline CPI.

The hotter inflation report brought the possibility of another Federal Reserve rate hike back into focus ahead of the October 27–28 meeting. CME FedWatch briefly indicated a 31.6% chance of a rate increase on October 28, compared with 22.1% a day earlier. Later pricing, however, suggested a 75% probability that policymakers would leave rates unchanged.

Uncertainty over the Fed’s next move pressured cryptocurrency markets because interest rates affect liquidity, borrowing expenses and investor demand for assets whose valuations depend on future growth. Bitcoin’s response to inflation data and its ability to maintain nearby support levels were already attracting attention before the latest decline.

The weakness extended across U.S. stock markets. The S&P 500 lost 1.1%, while the Nasdaq Composite declined 1.9%. A semiconductor-stock index also recorded its sixth consecutive daily loss, underscoring the growing strain on technology investments.

Asian equities experienced further selling. South Korea’s KOSPI plunged 8%, and Japan’s Nikkei 225 dropped 4.8%. Samsung Electronics shares declined 9.3%, SK Hynix and Kioxia each fell more than 11%, and SoftBank slid 9.4%.

Why Is Crypto Down Today?

Bitcoin dropped 4% as stronger U.S. inflation increased concerns about potential Federal Reserve rate hikes, prompting investors to reduce exposure to cryptocurrencies and technology-related investments.

AI-focused companies such as Oracle and CoreWeave also faced selling pressure as investors reassessed the impact of higher borrowing costs on businesses that require substantial capital. Technology supply-chain stocks suffered additional losses, while Ethereum’s sharper decline relative to Bitcoin reflected the vulnerability of higher-volatility crypto assets during a broad market retreat.

The market reaction points to a common macroeconomic trigger: inflation accelerated, rate-hike expectations briefly increased, and investors pulled back from technology shares and other risk-sensitive assets. Saxo Bank strategist Charu Chanana characterized the equity market response as a reassessment of financing costs, with investors questioning how much they should pay for AI-driven growth when borrowing expenses remain high and unpredictable.

JPMorgan analysts also highlighted funding challenges and IPO timelines as key risks for the AI investment theme. These concerns help explain the pressure on AI-related equities. For the crypto market, the inflation surprise appears to have intensified a broader risk-off move rather than triggered a cryptocurrency-specific sell-off.

The bond market provided an additional perspective. The 10-year U.S. Treasury yield fell 7.8 basis points to 5.110% as investors sought the relative safety of government bonds during the equity rout. Reuters linked the decline to safe-haven demand and concerns about slowing growth. This suggests that investors were also responding to economic uncertainty, rather than simply anticipating higher yields across all financial markets.

Attention now turns to upcoming speeches from Federal Reserve officials, U.S. producer price data and retail sales figures. If new economic releases or policymakers’ comments strengthen expectations of an October rate hike, technology stocks and higher-beta cryptocurrencies could face continued downward pressure.

However, if the probability of the Fed holding rates steady remains near 75%, investors may focus on whether the technology sell-off eases and Bitcoin can recover from approximately $80,764.

Taiwan Semiconductor Manufacturing Company’s third-quarter earnings, scheduled for later in Thursday’s Asian trading session, will provide another indication of confidence in the AI hardware sector. The Federal Reserve’s October 27–28 meeting remains the key event for investors assessing the near-term direction of interest rates and cryptocurrency markets.