Bitcoin, Ether Plunge 5% Ahead of Widely-Anticipated Fed Rate Cuts

Bitcoin and Ether experienced a significant downturn, dropping approximately 5% as traders brace for potential interest rate cuts by the U.S. Federal Reserve. This decline reflects shifting market sentiments and investor reactions to upcoming economic policies.

Key Takeaways

• Bitcoin (BTC) fell 3% to below $58,400, while Ether (ETH) dropped 5.5% in the last 24 hours.

• U.S.-listed Bitcoin ETFs saw inflows exceeding $263 million, the highest since July 22.

• Market expectations indicate a 51% chance of a 50 basis point cut and a 48% chance of a 25 basis point cut by the Fed.

Market Overview

Bitcoin (BTC) began the trading week on a negative note, falling below the $58,400 mark. The CoinDesk 20 index, which tracks the largest digital assets, also saw a decline of 5%. Over the weekend, Bitcoin had briefly surpassed $60,000, buoyed by favorable U.S. economic data. However, as Asian markets opened for trading on Monday, the crypto markets faced a sharp decline.

ETF Inflows

Despite the downturn, Bitcoin ETFs listed in the U.S. recorded significant inflows, totaling over $263 million. This marks the highest inflow since July 22, indicating sustained investor interest in Bitcoin. Ether ETFs also saw inflows, albeit smaller, at $1.5 million, suggesting that investors remain engaged with crypto assets.

Anticipated Fed Rate Cuts

The market is closely watching the Federal Reserve, with traders anticipating its first rate cuts in over four years. Polymarket bettors are estimating a 51% chance of a 50 basis point cut and a 48% chance of a 25 basis point cut, with only a 2% chance of no change. Historically, lower borrowing costs have led to increased bullish sentiment among traders, as cheaper access to capital tends to spur growth in riskier sectors.

Performance of Major Cryptocurrencies

Ether (ETH) led the losses among major cryptocurrencies, experiencing a 5.5% drop, marking its worst one-day performance since early August. Other cryptocurrencies also faced declines:

• Cardano (ADA): -5%

• Solana (SOL): -4%

• BNB Chain (BNB): -1.1% (best performer)

In contrast, Nervos’ CKB token saw a notable increase of 10.5% in the last 24 hours, driven by positive sentiment following its listing on the Korean exchange Upbit, known for its popularity with memecoins.

Futures Market Impact

Futures traders who had bet on rising prices faced significant losses, with over $143 million wiped out amid the sudden market drop. This volatility highlights the risks associated with trading in the crypto space, especially during periods of economic uncertainty.

BTC/ETH Ratio

The BTC/ETH ratio, which tracks the relative performance of Bitcoin and Ether, has fallen to four-year lows. This decline reflects the increasing competition Ethereum faces from other blockchain protocols, particularly Solana, which has emerged as a preferred platform for launching memecoins. New chains like Base and Telegram-affiliated TON are also capturing market attention, potentially impacting demand for Ether.

Conclusion

As the market navigates through these turbulent times, the upcoming decisions by the Federal Reserve will play a crucial role in shaping investor sentiment and market dynamics. The interplay between traditional financial policies and the evolving landscape of cryptocurrencies continues to create both opportunities and challenges for traders and investors alike.

Sources

• Bitcoin (BTC), Ether (ETH) Drop Ahead of Expected Fed Rate Cuts, CoinDesk.

• Bitcoin (BTC) y Ether (ETH) caen a la espera de los recortes de tipos de la Fed, CoinDesk.

• Bitcoin (BTC), ефір (ETH) впали перед очікуваним зниженням ставки ФРС, CoinDesk.

• Le Bitcoin (BTC) et l'Ether (ETH) chutent avant les baisses de taux attendues de la Fed, CoinDesk.

• Bitcoin (BTC), Ether (ETH) caem antes dos esperados cortes nas taxas do Fed, CoinDesk.