Bitcoin and XRP Drop. Why Inflation Data Could Halt the Crypto Rally.

Bitcoin is now trading about 3% off the record high it hit back in mid-July. (MARVIN RECINOS/AFP via Getty Images)

Bitcoin was sliding on Tuesday, meaning bulls may have to wait a little longer before the cryptocurrency hits a new high.

The large-cap token was down 0.8% to $119,237 over the past 24 hours, according to data from CoinDesk. Although it flirted with record levels on Monday, it is now more than 3% off the all-time high price of just above $123,000 that it hit in mid-July.

Ethereum jumped 2.4% over the past 24 hours, but other tokens were struggling to make gains. Solana dropped 0.6% and XRP fell 0.7%, per data from the crypto exchange Kraken.

Consumer-price inflation data could be one reason crypto investors were feeling a little on edge. Tuesday’s report showed that core inflation rose 3.1% from a year ago in July, well above the Federal Reserve’s 2% goal.

That reading could make it harder for the central bank to justify cutting interest rates in September, which would likely keep a lid on crypto prices.

“With core inflation now at 3.1%, that 3 percent level may be a psychological barrier to the Federal Reserve lowering short-term interest rates at its next meeting in September, notwithstanding the soft job growth numbers in recent months,” Vice President of Fixed Income Research at Mutual of America Capital Management Jerry Tempelman said Tuesday.

Higher borrowing costs tend to give the U.S. dollar a boost, which could draw investors away from digital alternatives such as Bitcoin.

Write to George Glover at george.glover@dowjones.com