Bitcoin fell below $74,000 on Tuesday after United States inflation came in hotter than economists had forecast, prompting traders to raise their bets on an interest rate increase from the Federal Reserve next month.

The largest cryptocurrency traded at around $73,660, down 1.3% over the previous 24 hours, taking it below the low of roughly $75,700 it reached on election night last week. The decline came within hours of the October consumer prices report, which showed headline inflation rising 0.4% month on month, above the 0.3% economists had expected.

Hot inflation lifts rate-hike bets

Core inflation, which strips out food and energy prices, rose 0.3% in October, also above the 0.2% forecast. No annual inflation figure was published, because last year's federal government shutdown prevented the collection of the price data needed for a year-on-year comparison.

Futures markets put the probability of a quarter-point Fed rate increase at the 9 December meeting at 89%, up from about 70% a week earlier. Fed Governor Christopher Waller had said before the data that he favoured a higher rate even if inflation cooled, and he has since been reported as open to a half-point move if the figures warranted it.

Higher rates tend to weigh on risk assets such as cryptocurrencies, which offer no yield and rely heavily on investor appetite for speculation. Bitcoin had already been struggling before the report: it traded near $74,200 in early European hours, close to an overnight low of $74,100, as traders positioned for the inflation numbers.

Altcoins hit harder than Bitcoin

The wider crypto market fell further than Bitcoin. Solana dropped more than 3% in 24 hours to around $84, Ripple's XRP also fell about 3% to $1.06, and Ethereum tumbled around 2.8% to roughly $2,000. The overall cryptocurrency market shed about 1.8% over the day and stood close to slipping below the $2.5 trillion mark.

Bitcoin has now spent days pinned below the $75,000 level. It is down about 10% over the past month, held back by persistent withdrawals from US spot exchange-traded funds, weak buying momentum and uncertainty over the Fed's next move.

ETF outflows add to the pressure

US spot bitcoin ETFs lost $201 million on Monday, according to Farside Investors, led by $213.2 million of outflows from BlackRock's IBIT, which has now posted seven straight sessions of redemptions. In the first week of November, the funds saw about $1.28 billion in net outflows, with withdrawals on four of the five trading days.

Sentiment in the market remains fearful. The Crypto Fear and Greed Index stood at 32 on Tuesday morning, in "fear" territory, although that was up from 29 on Monday and 25, or "extreme fear", on Saturday.

Traders will now watch whether Bitcoin can hold above the $71,900 area, which analysts have flagged as the next support level. A break below it could open the way towards $65,000, while a move back above $75,500 would be needed to change the short-term picture. For now, with a December rate rise looking more likely by the day, the path of least resistance for crypto remains downwards.