Bitcoin Dips Below $78K as Rising Rate Fears Shake Global Crypto Markets

Bitcoin (BTC) dropped sharply on Thursday as rising concerns over inflation and interest rates made traders anxious. The situation pushed investors away from riskier assets, leaving cryptocurrencies especially vulnerable to sudden sell-offs.

At the time of writing, bitcoin trades at $77,368.98, down 1.8% per CoinGecko market data.

Inflation and Interest Rates Drive Fresh Bitcoin Selling

Recent U.S. inflation data has raised worries about stricter monetary policy. Producer prices rose 0.4% in August, and the yearly increase for producer prices is now at 5.4%, according to government data.

This rise has made traders rethink their expectations for the Federal Reserve’s announcement before next week’s meeting. Fed-funds futures now show about a 70% chance that the Fed will raise interest rates by a quarter-point, higher than earlier predictions. For context, this percentage refers to the likelihood of the Fed raising interest rates, not that there is a 70% chance Bitcoin will drop by 70%.

Additionally, the situation in Europe has also added pressure, as the European Central Bank (ECB) raised its deposit rate by 25 basis points. The change raised the ECB’s main deposit rate to 2.5%, marking the second increase this year amid ongoing inflation worries.

The central bank now expects inflation in the eurozone to average 3% until 2026, well above its 2% target. Rising energy prices, with Brent crude oil recently over $100 per barrel, are a key part of these inflation concerns.

Together, higher energy costs and increased borrowing rates may make investors more cautious about holding risky assets.

Broader Crypto Market Joins Bitcoin’s Retreat

As in most cases, BTC’s price drop came alongside a decline in the prices of other crypto assets. Most cryptocurrencies, such as SOL, BNB, ADA, HYPE, and XRP, saw price declines. Leveraged traders have also faced increasing losses as prices remain below recent highs and volatility returns.

Notably, crypto assets are not the only digital asset class that dipped over the past 24 hours. Major U.S. stock price indexes also dropped. For instance, the S&P 500 declined by about 0.5%. Also, the Nasdaq slipped by about 0.3%.