Bitcoin plunges to $81,300 support as Fed hike odds hit 55% amid $100 million crypto wipeout

Bitcoin fell below $83,000 on Wednesday as hotter-than-expected US core inflation data revived expectations of further Federal Reserve interest rate hikes, triggering a fresh wave of liquidations across the cryptocurrency market.

CoinGlass data showed that over $100 million in leveraged positions were liquidated in the hour after the inflation report was released. This also pushed total liquidations above $220 million over 24 hours.

The sharp increase in forced selling highlighted how quickly traders reacted to renewed inflation pressures and the prospect of tighter US monetary policy.

According to the Bureau of Labor Statistics, consumer prices increased 3.7% annually in September, above the 3.6% forecast and August's 3.4% reading. Headline consumer prices rose 0.6% during the month, matching expectations, while core prices increased 0.3%, above the 0.2% consensus estimate.

On an annual basis, core inflation accelerated to 2.6% from 2.4%, suggesting that underlying price pressures remain persistent even after excluding volatile food and energy costs. This marks the 67th consecutive month US inflation has stayed above the Fed's 2% target.

Energy remained the biggest contributor to inflation, reflecting the economic fallout from the ongoing US-Iran conflict. Gasoline prices surged 9.1% during September, accounting for more than half the increase in headline CPI, while the broader energy index climbed 5.2%.

However, inflationary pressures spread to other parts of the economy. Shelter costs increased 0.4%, used vehicle prices climbed 0.7%, and higher prices were also recorded for recreation, education, air travel and medical services.

The breadth of these increases complicated expectations that policymakers could look past an energy-driven inflation shock without additional tightening.

Bond markets reacted sharply, with the benchmark 10-year Treasury yield reversing an earlier decline to rise approximately 7 to 9 basis points during the session.

Robin Brooks, a senior fellow at the Brookings Institution, warned that the inflation figures risked reigniting instability across global bond markets after a period of relative calm.

Meanwhile, the repricing also spread to expectations for Federal Reserve policy. Kalshi's prediction market showed the probability of a 25-basis-point Fed hike in October rising to 55% from 21%, while traders increased bets on further tightening through 2027.

Notably, the Fed had previously raised its benchmark interest rate by 25 basis points in September to a target range of 3.75% to 4%, its first increase in more than three years.

Can-Luca Köymen, investment strategist at Sygnum Bank, told CryptoSlate that the stronger inflation reading had reopened the possibility of another increase this month, although the bank still expects policymakers to hold rates steady.

“Core at 0.3%, above consensus, puts an October hike back in play after the market had faded it to one in five,” Köymen said.

He noted that the Fed's preferred inflation measure, the Personal Consumption Expenditures price index, will not be released until the day after its October policy decision, leaving officials to assess inflation risks without the latest PCE figures.

For Bitcoin, the immediate concern is that higher Treasury yields increase the appeal of interest-bearing assets, while a stronger dollar can tighten financial conditions and weaken demand for speculative investments.