Bitcoin Pulls Back Ahead of Fed Rate Cut

CoinDesk 20 Index: 1,822.90 -3.32%Bitcoin (BTC): $58,779.97 -1.93%Ether (ETH): $2,302.66 -4.24%S&P 500: 5,626.02 +0.54%Gold: $2,580.54 +1.47%Nikkei 225: 36,581.76 -0.68%

Bitcoin (BTC) started the week down 3% and is trading below $58,400, as the broader market as measured by the CoinDesk 20 Index is down 5%.

BTC spent most of the weekend above $60,000 following the release of data from the US. US-listed BTC exchange-traded funds (ETFs) recorded net inflows of over $263 million, the highest since July 22, while ether ETFs generated $1.5 million. Many traders around the world are now expecting the US central bank, the Fed, to cut interest rates for the first time in four years.

The highly anticipated week begins with a decline in crypto markets.

Ether (ETH) is leading the losses among the majors with a 5.5% drop in the last 24 hours, its worst single-day drop since early August, according to CoinGecko data.

Cardano’s ADA is down 5%, Solana’s SOL is down 4%, while BNB Chain’s BNB is the best performing token with a loss of 1.1%. Nervos’ CKB is seeing a 10.5% jump in the last 24 hours after Korean exchange Upbit listed the token.

Futures traders who bet on higher prices are losing over $143 million amid the sudden drop, according to CoinGlass data.

The Fed is expected to announce a rate cut and start the financial easing cycle with its statement on September 18.

But investors are divided on the extent of the cut, setting the stage for potential volatility in financial markets after the decision. At the time of writing, Fed fund futures show a 41% chance the Fed will cut interest rates by 25 basis points to a range of 5%-5.25%.

59% predict that it will decline to the 4.7%-5% range.

The chart shows how the last Fed rate cut cycle sent bitcoin to an all-time high of $70,000 at the time. The next bull market bounce came after the Fed stopped raising interest rates. BTC has been in the same range since then, seemingly waiting for the next rate cut cycle. Source: Bloomberg, ETC Group