Bitcoin falls 4% to $68,500 as inflation pushes investors to bonds
Bitcoin fell more than 4% on Friday to $68,500, wiping out gains built over the past three months and casting doubt on whether its bear market was ever really over. The trigger, analysts say, is inflation: Tuesday's Consumer Price Index report showed prices rose 0.4% in October, more than economists expected, and even stripping out food and energy, inflation ran hotter than forecast.
Traders now overwhelmingly expect the Federal Reserve to raise interest rates by a quarter percentage point in December, with some betting on an even bigger increase. "Because these are non-yielding assets, and we expect inflation to rise… people are chucking stuff like gold and Bitcoin to find… government bonds that are going up, providing you [with] income," Chris Beauchamp, chief market analyst at IG Group, said.
The retreat runs across crypto. CryptoQuant's demand indicator hit its weakest reading since December 2023, and Bitcoin exchange-traded funds are net sellers again. Tether's USDT, the largest dollar-pegged cryptocurrency, shrank by $7.7 billion over the past two months, a sign less cash is available in crypto markets.
Gold has not escaped either, trading near $3,900 an ounce on Friday against a January peak of about $5,600, down roughly 5% over the past month and nearly 5% from a year ago, according to Trading Economics. Bitcoin had rallied to $86,000 in September after the U.S. Treasury announced plans to expand bond buybacks, but has slid since.
Politics has added pressure: midterm elections handed Democrats control of Congress, a setback for a crypto industry that had leaned on Republican allies. Stephen Coltman, head of macro at 21Shares, said the results weren't a surprise and "they don't change the regulatory interpretations as they stand today… We at least have some regulatory stability for two years." Analysts also point to an "AI black hole" pulling money toward AI and away from Bitcoin and gold, while Beauchamp says Bitcoin remains "joined at the hip" with tech stocks.
