Bitcoin falls to lowest level in six months as chances of Federal Reserve rate cut decrease
Bitcoin recently took a nosedive, plummeting to $86,325, marking its lowest point since April. This sudden drop was triggered by traders moving away from risky assets in response to an unexpectedly positive jobs report that dashed hopes for a Federal Reserve rate cut in December. This significant decline in the leading cryptocurrency’s value is dragging down the entire crypto market, as uncertainty surrounding the Fed’s monetary policy is causing ripples throughout digital assets.
The sharp selloff experienced by Bitcoin on Thursday erased months of gains as it crashed to $86,325, its lowest level since April 21. The downward spiral occurred as investors quickly exited risky assets following the release of the surprisingly strong U.S. employment data, reducing the likelihood of a Federal Reserve rate cut next month.
The September jobs report was a game-changer, with 119,000 new positions added, surpassing the 50,000 forecasted by economists. This robust figure forced markets to reassess Fed policy, leading to a significant decrease in the probability of a December rate cut to just 40% according to the CME Group’s FedWatch tool.
Bitcoin’s decline was not an isolated event. The broader crypto market also took a hit, with major altcoins following suit after the flagship digital currency’s downward trend. XRP experienced a 2.3% drop, falling below the crucial $2.00 mark, while Ethereum shed over 3% and traded well below $3,000. Interestingly, Dogecoin remained stable amidst the market turmoil.
The irony of the situation was highlighted as Bitcoin’s crash coincided with Nvidia’s exceptional earnings report, buoying AI stocks. However, the unique relationship between AI and crypto, which generally drives correlations between technology stocks and digital assets, worked against Bitcoin this time. Traders who typically invest in both AI stocks and crypto found themselves in a quandary due to conflicting market signals.
According to CNBC’s market analysis, traders heavily involved in AI-related stocks tend to also hold Bitcoin, creating a linkage between the two trades. This interconnectedness results in Bitcoin often moving in tandem with tech sentiment, but the positive momentum from AI stocks was overshadowed by the surprising jobs data.
The continuous sell-off is part of a concerning trend that began in early October with a cascade of liquidations of highly leveraged crypto positions, triggering a market correction. These forced selling events exposed the vulnerability of the crypto market to sudden shifts in risk appetite and monetary policy expectations.
