Bitcoin fell Wednesday in response to consumer-price inflation remaining stubbornly high, increasing the odds for interest-rate increases and pushing cryptocurrencies lower.
The flagship cryptocurrency accelerated losses throughout the day, falling 2.1%, to $81,624, in Wednesday afternoon trading. Bitcoin started its decline in the morning, after the latest U.S. CPI release showed prices for consumer goods being 3.7% higher in September than the same time last year.
The Labor Department's figures were hotter than August's gain of 3.4%, and exceeded the 3.6% rise expected by economists surveyed by The Wall Street Journal.
Following the report's release at 8:30 a.m. ET, bitcoin prices fell to below $82,000 from trading at nearly $84,000.
Bitcoin is now trading around the spot cost basis for U.S. ETFs, Glassnode said in a note. Below that is a large block of bids sitting on Binance for bitcoin at $80,000, the firm said, making those prices key support levels for bitcoin.
Should bitcoin slide lower than that, then analysts have projected prices could retreat back to around $70,000, evaporating the sharp gains bitcoin posted last month.
A stronger-than-expected inflation reading tends to pressure bitcoin, increasing expectations for higher U.S. interest rates and weighing on non-yielding assets such as cryptocurrencies.
"Core [inflation] at 0.3%, above consensus, puts an October hike back in play after the market had faded it to one in five," Can-Luca Köymen, investment strategist at Sygnum Bank, said.
"For bitcoin, higher yields and a firmer dollar are the near-term headwind, and that matters more than any single day's ETF flow," Köymen added.
Demand for bitcoin has also been an issue on both the retail and institutional sides, analysts said, exaggerating price movements due to the low volumes being traded but providing little lasting momentum for bitcoin in either direction.
The CME Group's FedWatch assesses a 67% chance that interest rates stay unchanged after the Federal Reserve's Oct. 28 meeting, with a 33% chance of a quarter-point boost. Immediately after the CPI report, odds were seen swinging to 50/50 for a potential increase.