Bitcoin price plunged following the release of September US inflation data at a higher level than expected, reigniting fears of the Fed’s interest rate stance. The sell-off came on the heels of a steep rise in consumer prices, and traders came to think more highly of the chances of additional monetary hikes at the October FOMC meeting. The move pushed Bitcoin below a key psychological level as the market reacted to persistent inflationary pressure.

Bitcoin price dropped significantly after the U.S. Bureau of Labor Statistics announced that its headline CPI inflation rate rose to 3.7% in September from 3.4% in August. Inflation for the month was also up to 0.6% from 0.4%.

Bitcoin traded around $83,700 on TradingView, but experienced a sharp pullback shortly after midday on Oct. 14. The price action was headed towards the $82,600 level with the large red candlestick, followed by smaller candles in the area of the lows. Bitcoin was being sold at $82,641 on CoinMarketCap with a 0.58% decrease in 24 hours.

The BTC price chart shows a quick change of momentum. Bitcoin’s price had previously ranged around $83,000 and $83,900 as sellers took the upper hand during the price action. The recent dip has brought the cryptocurrency below $83,000, and traders are waiting to see if the $82,000 level offers support.

Investors are now closely watching whether the BTC price will be able to stabilize or if the anticipation of higher borrowing rates will cause additional losses in the wider digital asset market.

The inflation report also revealed that the core CPI — excluding food and energy — rose 2.6% from a year ago, from 2.4% in August. Core inflation was unchanged at 0.3% month-on-month, higher than the 0.2% rise foreseen by economists. The figures make the Fed’s job of getting inflation back down to its 2% goal difficult.

The CME FedWatch indicator suggested that the Fed is 49.3% likely to raise rates at its October 28 meeting versus 50.7% probability of no rate hike. The current target range is 3.75% to 4.00%.

The expected increase in Fed rates might deter Bitcoin by making interest-bearing assets more attractive and by making monetary conditions tighter. Now traders will be looking to see if inflation worries remain a burden to cryptocurrencies before the Fed meeting.

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