Bitcoin Tumbles to $53K, Ether Turns Negative for 2024 as Panic Grips Markets

The intense selling wave in cryptocurrencies over the weekend gained momentum on Sunday evening in the US, with bitcoin {{BTC}} falling to levels not seen since February, and ethereum {{ETH}} falling to prices not seen since December.

Bitcoin is down 12% in the last 24 hours and 20% for the week. Now ether {{ETH}}, down 21% in the last 24 hours and 30% in the last week, has lost all of its gains since the beginning of the year and is down about 3% since January 1st.

The broader CoinDesk 20 Index is down 12% in the past 24 hours.

The trigger for what is now turning into a major correction in crypto and traditional markets may have been the Bank of Japan, which raised its benchmark interest rate last week. That monetary tightening sent the yen higher and the country’s Nikkei stock index lower. The Nikkei, which fell another 6% on Monday morning, is down nearly 15% in the past three sessions and 20% from its mid-July peak.

The move in Japan spilled over to the U.S., with the Nasdaq down more than 5% in the final two sessions of last week. Nasdaq futures were down 2.5% in Sunday evening action.

In addition to the Bank of Japan’s unexpectedly hawkish outburst last week, the U.S. Federal Reserve also surprised some by not holding interest rates steady but appearing hesitant to cut them in September, a move that almost all market participants thought was a sure thing.

The Federal Reserve was too slow to raise interest rates. Now it’s too slow to lower them.

— Bill Ackman (@BillAckman) August 5, 2024

It remains to be seen whether the Fed made a policy mistake, but markets are currently setting their own agendas. Investors priced in a 100% chance of a US base rate cut in September, a 71% chance of a 50 basis point cut and a 29% chance of a 25 basis point move.

Looking more closely at the maturity curve, the 10-year U.S. Treasury yield fell to 3.75% on Sunday evening from 4.25% a week ago, a full 150-175 basis points below the current Fed funds target of 5.25%-5.50%.