Bitcoin slipped below the psychologically important $77,000 level on Thursday as investors sharply increased their expectations of another Federal Reserve interest-rate hike.
The world's largest cryptocurrency fell to an intraday low of roughly $76,748 on Sept. 10.
Fed hike odds surge after hot inflation data
Expectations of tighter monetary policy jumped on Thursday after the latest U.S. Producer Price Index showed wholesale inflation remaining hotter than economists had hoped.
The PPI rose 5.4% year over year in August, slightly above the 5.3% consensus estimate. The monthly increase came in at 0.4%.
Following the release, traders increased bets that the Federal Reserve would raise interest rates by at least 25 basis points at its Sept. 16 meeting.
The CME FedWatch tool showed the probability of a hike climbing to roughly 70% following the PPI report, compared with around 64% beforehand. Other market gauges put the odds even higher, at approximately 74%.
All eyes are now on Friday's Consumer Price Index report. Markets are expecting headline inflation to rise around 0.4% in August.
A hotter-than-expected CPI print could further cement expectations of a September hike.
Surging oil prices reignite inflation fears
The Fed story is closely connected to another major source of pressure on Bitcoin: soaring energy prices.
Brent crude surged above $100 per barrel on Thursday as escalating tensions in the Middle East raised concerns about global supply disruptions. U.S. crude also moved above the $100 mark.
Treasury yields are becoming another major headwind
The bond market is adding substantially to the pressure.
The benchmark 10-year U.S. Treasury yield climbed to approximately 4.92% on Thursday, reaching its highest level since 2023. Meanwhile, the policy-sensitive two-year yield jumped to roughly 4.53%.
Longer-duration yields have moved even more dramatically. The 30-year Treasury yield briefly reached roughly 5.35%, its highest level since 2007.
This matters for Bitcoin because Treasury securities compete with speculative assets for investor capital.
Bitcoin follows stocks lower as risk appetite deteriorates
Bitcoin's decline also coincided with weakness across traditional markets. At midday on Thursday, the Dow Jones Industrial Average was down around 0.7%, while the S&P 500 and Nasdaq Composite had fallen roughly 0.6%.
The European Central Bank added to that backdrop on Thursday by raising its key interest rates by 25 basis points as inflation concerns remained elevated, reinforcing the broader sense that global monetary conditions could remain restrictive.
Bitcoin ETF outflows
Finally, Bitcoin is also dealing with a deterioration in institutional flows.
U.S. spot Bitcoin exchange-traded funds have now recorded two consecutive sessions of net withdrawals.
According to Onchain Lens, the products suffered $100.7 million in net outflows on Sept. 9 after recording another $46.6 million in withdrawals on Sept. 8.
