Top Crypto Assets Slide Following Hot US Inflation Data

Digital asset markets experienced notable declines on Wednesday and Thursday following reports that United States consumer prices rose more than anticipated in September. The macroeconomic data prompted renewed concerns about prolonged tighter monetary policy, weighing heavily on risk assets across the board.

Data from the Labor Department’s Bureau of Labor Statistics showed the Consumer Price Index (CPI) advanced 3.7% over the 12 months ending in September, climbing past August's 3.4% and exceeding the 3.6% forecast. On a monthly basis, the CPI increased by 0.6%, up from 0.4% the prior month. Rising gasoline prices were cited as a primary contributing factor. Core inflation, which strips out energy and food, also came in above expectations at 0.3% for the month and 2.6% annually.

Major Assets Shed Value

Following the data release, the largest cryptocurrency by market capitalization fell slightly. Bitcoin traded near $82,827, marking a roughly 1% drop over a 24-hour window, with Wednesday morning trading in New York seeing the asset dip as low as $82,331. The slide halts momentum from what had been a strong August and September for the asset.

Ethereum saw a steeper decline, losing approximately 5.3% over a 24-hour span to trade near $2,370. The drop below the $2,400 mark triggered heavy liquidations in the derivatives market. According to CoinGlass data, $293.98 million in Ethereum liquidations occurred over 24 hours, with long positions making up 90% of that total. This followed a previous volatile session on Tuesday that wiped out roughly $120 million in long positions. Adding to the downward pressure, CryptoQuant data indicated that Ethereum exchange netflows have been positive since Sunday, suggesting more tokens were moved onto trading platforms than withdrawn.

Privacy-focused asset Zcash also struggled amidst the macroeconomic pressure. Zcash extended a 6% loss to trade around $1,094, dipping below last week’s $1,115 low and falling further from a late-September peak of $1,698. The token's decline overshadowed positive developments for the Grayscale Zcash-focused exchange-traded fund (ZCSH), which recorded $3.68 million in inflows on Wednesday based on SoSoValue figures. These inflows snapped two consecutive days of withdrawals, but the spot-market drop suggests the localized buying pressure was insufficient to counter broader market selloffs.

Macroeconomic Headwinds

The sticky inflation metrics have increased the likelihood of further interest rate hikes by the Federal Reserve, which previously increased rates in September. According to the CME Group’s FedWatch tool, probability estimates for a rate hike at the central bank's upcoming October 28 meeting shifted upward following the CPI release, with reports placing the likelihood between 35% and 47%.

Treasury yields and the US dollar strengthened in response to the inflation release. The 10-year Treasury yield surged to 5.32% before retreating slightly to 5.22%, while the US Dollar Index climbed above 102.80. These macroeconomic shifts generally increase borrowing costs and restrict liquidity, raising the opportunity cost of holding non-interest-bearing digital assets.