- The Bitcoin Price has fallen sharply, dropping to about $86,000 from its October high of $126,000.
- Market concerns are rising about a potential $1 trillion collapse in the Bitcoin and crypto markets.
- Recent U.S. jobs data lowered expectations for a December Federal Reserve interest rate cut, affecting risk assets like bitcoin.
- Vanguard asset management head Sara Devereux expects only one or two Fed rate cuts next year, fewer than traders anticipated.
- Federal Reserve officials remain divided on rate changes, and stronger job growth suggests no rate cut at the December meeting.
The price of bitcoin dropped steeply in recent weeks, falling to around $86,000, down from $126,000 in October. This decline has caused increased concern about a potential $1 trillion sell-off in the bitcoin and wider cryptocurrency markets.
The drop followed delayed U.S. jobs data, which showed an increase of 119,000 jobs in September, surpassing expectations. This data reduced the chances of a Federal Reserve interest rate cut in December, a move previously anticipated to help support riskier assets like bitcoin.
Sara Devereux, head of bond asset management at Vanguard, said she now expects the Fed to cut interest rates only once or twice more, not the four times some traders had hoped. “Too many Fed cuts are priced into the market right now. The market is over-relying on that,” Devereux told the Financial Times. She added the Fed may reach a “neutral” interest rate level by mid-next year, where borrowing costs neither encourage nor slow economic growth.
Market experts noted that the recent jobs data and Fed meeting minutes underscore division among officials about rate changes. Isaac Stell from Wealth Club explained that stronger job growth and hesitancy among Fed members likely mean no rate cut in December. “The sleigh bells will not be ringing this December at the Fed,” Stell said, indicating disappointment for traders expecting easier monetary policy.
The market’s reaction has affected bitcoin and other cryptocurrencies. Dan Coatsworth, head of markets at AJ Bell, noted that when confidence in technology stocks falls, investors are even less likely to speculate on cryptocurrencies. He pointed out confusion over the Fed’s plans has also contributed to market instability.
Trading data from the CME’s FedWatch tool shows the probability of a December rate cut has dropped to about 40%, a significant decline from previous estimates near 98%. This shift has further pressured the crypto market, leading to increased selling. Alex Kuptsikevich, chief market analyst at FxPro, warned that negative momentum could soon trigger a widespread sell-off, as bearish traders target stop-loss levels.
Overall, the combination of stronger U.S. job growth and cautious Federal Reserve signals has led to falling bitcoin prices and heightened uncertainty in the cryptocurrency markets.
Sources: CME FedWatch tool, Financial Times.
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