Bitcoin Sees Significant Drop Amid Diminishing Hopes for Fed Rate Cuts
On Friday, Bitcoin plummeted to its lowest level in six months, reflecting the growing unease in the markets as a wave of selling pressure gripped risk assets. This steep decline was largely influenced by fading expectations that the Federal Reserve would implement cuts to U.S. interest rates in its upcoming policy meeting.
The Market’s Unease and the Impact on Bitcoin
As the day progressed, there was a slight easing in the sell-off of U.S. equities, yet the overall sentiment remained cautious. Investors were gearing up for a slew of economic data releases in the following week, particularly after enduring a notable 43-day government shutdown. This environment of uncertainty significantly affected Bitcoin, with many viewing it correlation to traditional equities—a relationship that has led to Bitcoin’s vulnerability in volatile markets.
Juan Perez, the director of trading at Monex USA, noted that “Bitcoin and crypto have generally enjoyed a positive correlation with good times in equities,” implying that during periods of risk aversion, investors are less inclined to hold or invest in cryptocurrencies. This dynamic indicates that the cryptocurrency sector has yet to establish itself as a reliable haven amidst broader market fears.
Federal Reserve Stance and Its Consequences
As central bank officials tighten their stance regarding future rate cuts, the sentiment among investors has shifted. Kansas City Fed President Jeffrey Schmid recently underscored concerns regarding “too hot” inflation, suggesting that factors extending beyond tariffs are influencing their monetary policy considerations. Markets now peg the probability of a December rate cut at approximately 40%, a considerable decline from the 90% anticipated at the start of the month.
Bitcoin’s Current Performance
In early afternoon trading, Bitcoin was down 2.3%, trading at $96,564, and had earlier dipped to $95,885.33, marking its lowest value since May 7. Ether, the second-largest cryptocurrency, exhibited less dramatic movements, remaining relatively unchanged at $3,175.22, although it too had recently touched a ten-day low.
Bears Are Dominating the Market
According to financial analyst Dave Rosenberg, Bitcoin has officially entered a bear market territory, having seen a decline of more than 20% in just over a month. This bearish trend has also been evidenced by massive redemptions in exchange-traded funds (ETFs), with reported outflows hitting $870 million on Thursday alone.
Since its peak on October 7, the overall cryptocurrency market capitalization has shrunk by more than $1 trillion—an alarming 24% decrease that underscores the gravity of the current market conditions.
Long-Term Holders and Market Response
Amidst this downturn, data from crypto research firm Glassnode shows that long-term Bitcoin holders have begun to accelerate profit-taking. Remarkably, these holders sold off 815,000 bitcoins over the past 30 days, marking the highest rate of sales since January 2024, according to insights from CryptoQuant.
Overall, the bearish backdrop for Bitcoin paints a stark picture for the cryptocurrency market—a sector currently grappling with uncertainty, investor hesitation, and significant changes in market sentiment.
