- Bitcoin, ether and dogecoin tumbled to their lowest in weeks after US inflation data.
- Rising inflation has prompted investors to reassess how quickly the Federal Reserve might raise rates.
- Cryptocurrencies have struggled recently as regulatory scrutiny picked up around the world.
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Bitcoin dogecoin and cardano's ada token hit their lowest in three weeks at one point on Wednesday before recovering some stability, while ether touched a two-week low after a key measure of US inflation raised concern among investors that the Federal Reserve may put an end to its current policy of low borrowing costs.
The US consumer price index rose 5.4% in June compared with a year earlier, the fastest pace since 2008, according to data on Tuesday.
Bitcoin was last up around 1% on the day at $32,830, according to Bloomberg data. Earlier, it fell to as little as $31,599, its lowest in three weeks.
"The strange narrative is that this is due to the strong inflation yesterday in the US, perhaps on the fear that this will bring forward Fed tightening measures although, we do also have the ongoing backdrop of a Chinese crackdown on mining," Saxo Bank chief investment officer Steen Jakobsen said.
Fed fund futures, which track short-term interest rate expectations, suggested traders are betting on the Fed raising interest rates by late 2022, if inflation persists, Reuters reported.
This could affect cryptocurrencies, which have profited from over a year of ultra-cheap money that has sent investors searching high and low for anything that carries a decent yield.
China's recent crackdown on crypto trading and the regulatory woes of the Binance exchange in various counties - and most recently the United Kingdom on Wednesday - have also contributed to the steady decline in the value of bitcoin and other coins in the past couple of months.
Bitcoin is still up by about 260% over the last 12 months, but it has fallen by more than 50% since peaking at a record of almost $65,000 in April.
The trend has been similar in other cryptocurrencies. Ether, the second largest coin by market value after bitcoin, touched a two-week low of $1,863 earlier in the day. It was last trading up 1.5% around $2,005. The price is also 50% below its May high around $4,390.
Meme coin dogecoin touched a three-week low of $0.184, before recovering to trade around $0.203, up 0.66% on the day, while the ada token - widely regarded as being less energy-intensive than a number of other coins - was last up 0.4% around $1.282, having fallen earlier to a three-week low of $1.198.