Bitcoin experienced a significant downturn, hitting its lowest point in six months as a broader sell-off in risk assets intensified. The decline comes amid diminishing expectations for a U.S. interest rate cut by the Federal Reserve at its forthcoming policy meeting. Despite a slight easing in U.S. equity selling in the afternoon, investors remain cautious as they prepare for a series of important economic indicators in the coming week, following the government’s reopening after an unprecedented 43-day shutdown.
Market analysts indicate that bitcoin and other cryptocurrencies typically rise in correlation with positive sentiments in equity markets. However, current sentiments suggest that a lack of risk-taking enthusiasm is causing hesitation towards investments in bitcoin and similar assets. Juan Perez, director of trading at Monex USA, highlighted that without confidence in risk appetite, the crypto market suffers as well.
The overall pressure on risky assets has escalated over the past few days due to shifting expectations regarding interest rates. The likelihood of a rate cut in December has dropped significantly, with only a 40% probability now priced in, a stark decrease from 90% at the beginning of the month and just over 60% earlier this week. Statements from central bank officials, including Kansas City Fed President Jeffrey Schmid, have indicated concerns about persistent inflation, leading to a more cautious stance regarding potential rate cuts.
As of early afternoon trading, bitcoin, the largest cryptocurrency by market capitalization, experienced a 2.3% decline, bringing its price down to $96,564 after briefly touching $95,885.33, the lowest since early May. In contrast, ether, the second-largest cryptocurrency, remained stable at $3,175.22, despite reaching a ten-day low earlier.
Analysts are expressing concerns about the future of bitcoin, as Dave Rosenberg, founder of Rosenberg Research, noted that the cryptocurrency has officially entered bear market territory with a decline of over 20% in just over a month. Significant outflows have been reported from exchange-traded funds, totaling $870 million in redemptions just on Thursday. Since peaking on October 7, the entire cryptocurrency market capitalization has decreased by over $1 trillion, representing a 24% drop.
Data from crypto research firm Glassnode reveals that long-term bitcoin holders are accelerating profit-taking. In the last 30 days, these holders have sold 815,000 bitcoin, marking the highest level of sales since January 2024, according to insights from CryptoQuant, another digital asset research organization. Overall, the outlook for bitcoin remains bearish as market conditions continue to evolve.
