Bitcoin has plummeted to its lowest level in six months, marking a significant decline in the cryptocurrency market. This downturn is attributed to a broader sell-off in risk assets, which has been exacerbated by diminishing hopes of a US interest rate cut by the Federal Reserve at its upcoming policy meeting. The likelihood of a December rate cut has decreased to approximately 40%, down from around 90% earlier in the month and over 60% earlier in the week.
As of early afternoon trading, Bitcoin, the world’s largest cryptocurrency, had fallen by 2.3% to $96,564, with a previous low of $95,885.33, its lowest point since May 7. Ether, the second-largest cryptocurrency, remained unchanged at $3,175.22 after dropping to a 10-day low. The decline in cryptocurrencies is part of a larger trend of risk assets coming under pressure due to shrinking expectations of a rate cut from the Fed.
The US equity market also experienced selling pressure, although it eased slightly in the afternoon ahead of the weekend. Investors are on edge as they await a slew of economic data next week, following the government’s reopening after a record 43-day shutdown. The crypto market capitalization has fallen by over $1 trillion, or 24%, since peaking on October 7.
Analysts describe the backdrop for Bitcoin as bearish, with investors concerned that the Federal Reserve may hold off on a December rate cut and that AI-related stocks have become overpriced. Long-term Bitcoin holders have accelerated their profit-taking, with 815,000 Bitcoins sold over the past 30 days, a record high since January 2024, according to CryptoQuant.
The decline in Bitcoin and other risk assets reflects the current uncertainty in the financial markets. As investors await the Federal Reserve’s decision on interest rates, the cryptocurrency market is likely to remain volatile. The significant decrease in crypto market capitalization and the accelerated profit-taking by long-term Bitcoin holders underscore the bearish sentiment in the market. With a slew of economic data scheduled for release next week, investors will be closely watching for any signs of a potential rate cut and its impact on the cryptocurrency market.