Bitcoin, trading at approximately $99,874.49, along with other cryptocurrencies, experienced a significant downturn, particularly during U.S. market hours. After reaching a high of around $104,000 overnight, Bitcoin reversed its trajectory as the day progressed and remained just above the $100,000 mark by noon on the East Coast, reflecting a decline of more than 1% over the past 24 hours.
This retreat in the cryptocurrency market is emblematic of a broader plunge in risk assets as investors adjust to the Federal Reserve’s perceived stance on interest rates. At present, the Fed does not seem inclined to implement rate cuts in December. This uncertainty has had a noticeable impact, leading the Nasdaq to drop 2% and the S&P 500 to decrease by 1.3%.
The repercussions extended beyond Bitcoin, severely affecting crypto-related equities, particularly those tied to mining operations heavily invested in artificial intelligence infrastructure and data centers. Specific companies faced steep declines, with Bitdeer (BTDR) plummeting by 19% and Bitfarms (BITF) seeing a 13% drop. Other players in the field, such as Cipher Mining (CIFR) and IREN, also reported losses exceeding 10%. The broader crypto equity sector was similarly affected, with the likes of Galaxy (GLXY), Bullish (BLSH), Gemini (GEMI), and Robinhood (HOOD) experiencing declines in the range of 7% to 8%.
The current market conditions reinforce a trend of ongoing weakness in cryptocurrency trading during U.S. hours, coinciding with diminished expectations for an imminent rate cut from the Federal Reserve. Paul Howard, a senior director at the trading firm Wincent, pointed out that cryptocurrencies now have a much closer correlation with macroeconomic factors than in previous periods. With market predictions suggesting a near 50% chance of a 25 basis point rate cut next month, Howard anticipates Bitcoin will maintain a subdued presence around its current levels for the remainder of the year. He expressed skepticism about Bitcoin surpassing its recent highs before 2025, predicting instead a steady but volatile rise over the coming year.
In addition to these factors, the ongoing government shutdown is having echoes throughout the financial landscape. While many investors often criticize government deficits, the liquidity effects of these deficits can inadvertently boost asset prices. The shutdown is likely to have minimal ramifications on these deficits in the short term, with market analyst Mel Mattison noting that the federal government operated with a $198 billion fiscal surplus in September. The upcoming October data is expected to reveal an even greater surplus due to the prolonged governmental closure.
Mattison highlighted a prevailing trend of limited fiscal liquidity affecting the markets lately—a situation he described as one of the driest in recent memory. However, he remains optimistic about the future, predicting a return of liquidity as fiscal policies are reintroduced. “The flood gates are about to open,” he stated, forecasting a surge of fiscal spending in the coming quarters as political pressures mount. Although he warned that volatility may persist in the immediate term, he believes upward price movement should follow as liquidity re-enters the market.
