Bitcoin dropped below $74,000 on Wednesday, driven by growing expectations that the U.S. Federal Reserve will raise interest rates further to combat persistent inflation. The broader cryptocurrency market also faced pressure due to regulatory uncertainty following the Democrats' victory in the midterm elections.
Bitcoin fell 1.2% to $73,935.0 by 00:56 ET (05:56 GMT), hitting a three-month low. The decline was exacerbated by a stronger dollar, rising yields, and continued outflows from spot exchange-traded funds. The crypto market has historically struggled in high-rate environments, as seen during the Fed’s hiking cycle in 2022-2023.
Markets now anticipate an 89% chance of a 25 basis point rate hike in December, with a smaller possibility of a 50 basis point increase. Hawkish comments from two Fed officials reinforced these expectations, as they emphasized the need for higher rates to tackle inflation. The prospect of tighter monetary policy has increased the opportunity cost of investing in speculative assets like crypto.
Altcoins also declined, with Ethereum dropping 2.4% to $2,066.29, and other major cryptocurrencies like Solana and XRP falling by 3.8% and 3.5%, respectively. Among memecoins, Dogecoin fell 2.8%, while Shiba Inu rose slightly by 0.4%.