By Avery Klein
Bitcoin moved below the $82,000 mark on Tuesday as elevated oil prices and persistent geopolitical tensions dampened risk appetite among investors ahead of the Federal Reserve's policy meeting later this month.
At 05:19 ET (09:19 GMT) Bitcoin was trading around $81,511.2, down roughly 1.5% on the day. The world's largest cryptocurrency had climbed above $83,000 in the prior session but was unable to hold those gains. It has had difficulty sustaining a recovery after pulling back from levels above $85,000 earlier in the month.
Energy market drivers
Oil prices remained elevated on Tuesday, with Brent crude futures climbing to as high as $111.05 a barrel, marking a fresh five-month high. The increase in crude coincides with attacks on Saudi Arabian infrastructure and ongoing disruption risks across the Middle East, developments investors say have kept energy markets on edge.
Higher fuel costs raise the prospect that energy-driven inflation could persist, which in turn may complicate the Federal Reserve's efforts to return inflation toward its 2% target. That dynamic has the potential to constrain the central bank's flexibility to loosen policy, arguments that have weighed on risk-sensitive assets such as cryptocurrencies - assets that in earlier periods benefited from expectations of easier monetary policy and improved liquidity.
Rate outlook and recent inflation data
Market participants are concentrating on the Fed's Oct. 27-28 meeting for clues on the future path of interest rates. Current FedWatch data show markets have scaled back expectations of an imminent rate increase, assigning an 18% probability of a hike at the upcoming meeting. Traders are, however, pricing in a 75% chance of a rate increase in December.
Recent U.S. inflation reads have reinforced concerns about rates staying elevated. In September, consumer prices rose 3.7% year-on-year while core inflation increased 2.6% year-on-year, both slightly above economists' expectations. Gasoline prices jumped 9.1% during the month and accounted for more than half of the monthly uptick in headline consumer prices, reviving worries that energy-driven inflation could keep rates higher for longer.
Crypto market moves
Most altcoins fell on Tuesday amid the cautious market tone. Ethereum, the world's second-largest crypto, was down 2.2% at $2,385.92. XRP slipped 1.4% to $1.2953. Solana eased 1.2% while Cardano fell 2%. Among meme tokens, Dogecoin declined 0.8%.
The combination of higher oil, renewed geopolitical risk, and sticky inflation readings has tightened financial conditions for risk assets, including digital tokens whose recent rallies have been sensitive to shifts in the monetary policy outlook.
Vahid Karaahmetovic contributed to this report.