Bitcoin Slumps on Crude Oil Surge and Inflation Fears
Bitcoin has been on a downward spiral over the past five days, dropping 4.33% to trade near $77,284. This decline is largely attributed to the surge in crude oil prices, with October WTI crude settling at $102.48 a barrel and Brent crude reaching $107.63 a barrel.
The increase in energy prices has sparked inflation fears, driving the market pullback. Military conflict in the Middle East, including attacks between U.S. forces and Iran as well as strikes near the Bab el-Mandeb Strait involving Saudi Arabia and Houthi forces, have raised concerns over shipping routes and energy supply.
The bond market has also been affected, with the 10-year U.S. Treasury yield reaching its highest point since October 2023 at 4.95% intraday, while the 30-year yield rose to 5.36% and the 2-year yield exceeded 4.50%.
Inflation data has added further stress to financial markets, with the U.S. Bureau of Labor Statistics reporting a 0.4% month-over-month increase in the August Producer Price Index and a 5.4% year-over-year rise. The monthly surge in diesel fuel prices was particularly noteworthy, increasing by 24.1%.
Market participants are pricing in a 76% probability of a 25-basis-point interest rate hike at next week's Federal Open Market Committee meeting.