Bitcoin prices experienced a significant decline, dipping below $104,000 on Tuesday, part of a broader downward trend that has gripped the cryptocurrency market over the past month. Investors seem to be retreating from riskier assets as the Federal Reserve adopts a cautious stance regarding interest rate cuts.
In recent weeks, Bitcoin has seen a notable reduction in its value, falling 3.78% within just one day to approximately $103,970. This drop matches previous lows from last month and approaches levels not witnessed since June when Bitcoin traded below the $100,000 mark. Over the past week, Bitcoin has decreased by 10.3%, leading a general downtrend across the cryptocurrency landscape. Other digital currencies have also faced substantial losses: Ethereum decreased by 16%, XRP by 15.2%, BNB by 17.5%, and Solana saw a significant drop of 20.5%. The meme token Dogecoin similarly experienced a reduction of 20.1%.
On October 6, Bitcoin reached a record high of over $126,000, but since then, it has lost nearly 11% ahead of the Federal Reserve’s recent decision to cut interest rates by a quarter-point. However, Fed Chair Jerome Powell indicated that further reductions in December are not guaranteed, leaving many market participants uncertain about the future.
There is a historical correlation between lower interest rates and rising cryptocurrency values. For example, Bitcoin soared from $5,000 in March 2020 to approximately $69,000 by November 2021, coinciding with significant rate cuts during the pandemic. Conversely, during the Fed’s rate hikes in 2018, Bitcoin’s value plummeted from about $20,000 to around $3,000.
On Monday, Fed Governor Lisa Cook expressed her indecisiveness regarding a December rate cut. It remains to be seen whether other central bank officials will advocate for maintaining current interest rate levels. In contrast, Kansas City Fed President Jeffrey Schmid recently voted against any immediate reductions.
In terms of market performance, Bitcoin’s 3.7% drop in October marks its worst October performance in a decade, according to CoinMarketCap data. Overall, the total market value of cryptocurrencies has seen a staggering reduction of approximately $760 billion over the past month, falling from $4.21 trillion on October 5 to around $3.45 trillion on Tuesday.
Initial surges in Bitcoin’s value were partly fueled by the Trump administration’s legislative support aimed at easing regulatory constraints within the crypto market. Earlier in the year, Bitcoin surpassed significant thresholds of both $110,000 and $120,000, buoyed by investments from various companies, including Trump Media and Technology Group’s ambitious plan to create a $2.5 billion corporate bitcoin reserve. Additionally, the U.S. government has been accumulating its own bitcoin reserves, with estimated assets totaling between $15 billion and $20 billion as of August.
During the recent federal government shutdown, Bitcoin appeared to be increasingly viewed as a safe haven asset, rising alongside gold, silver, and platinum prices, underlining its potential as a protective investment in uncertain economic times.
