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Bitcoin sank below $59,000 having spent much of the weekend above the $60,000 mark. BTC traded around $58,550 in the European morning, a drop of 2.4% over 24 hours at the start of a week in which traders worldwide expect the Federal Reserve to make its first interest-rate cut in more than four years. The broader digital asset market as measured by the CoinDesk 20 Index (CD20) is 3.6% lower. Crypto markets were buoyed by favorable U.S. economic data on Friday, which sparked a short-term rally. Bitcoin ETFs saw inflows of over $263 million, their highest since July 22, while the ether equivalents added around $1.5 million.
Ether led losses among major cryptocurrencies, sliding 4.5% in 24 hours. Cardano’s ADA fell 5% and Solana’s SOL declined 4%, while BNB Chain’s BNB was the best performer slipping just 1.1%. Futures traders betting on higher prices lost over $143 million amid the sudden drop, CoinGlass data shows. Elsewhere, the widely watched BTC/ETH ratio, which tracks the relative movements of the two largest tokens, fell to four-year lows. Ethereum as a protocol has had some serious competition in the last year with Solana looking to be the destination of choice to launch memecoins and new chains like Coinbase's Base and Telegram-affiliated TON capturing more mindshare, which has probably hit demand for the Ethereum blockchain's native token.
The Fed is widely expected to announce an interest-rate cut on Sept. 18, kicking off the so-called easing cycle. Traders, however, are split on the size of the cut, setting the stage for a potential volatility explosion in financial markets after the decision. At press time, the Fed funds futures showed a 41% chance of the Fed reducing rates by 25 basis points (bps) to the 5%-5.25% range and a 59% probability of a bigger 50 bps reduction to the 4.7%-5% range. The stalling of bitcoin's upward momentum following its recovery from below $53,000 could be attributed to the uncertainty over the size of the impending rate cut.
Chart of the Day
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- The chart illustrates how the last Fed rate-cutting cycle spurred a bitcoin surge to then all-time high levels around $70,000.
- Its more recent bull market jump came after the Fed ceased increasing rates, since when BTC has trod water, seemingly awaiting the next rate-cutting cycle.
- Source: Bloomberg, ETC Group
