Why are Bitcoin and Ether Prices Sliding Despite Market Conditions?
The U.S. Federal Reserve may start a rate-cutting cycle in September, according to indicators, but Friday saw more declines in equities indices and major altcoins like Bitcoin and Ether. Over the previous day, the price of bitcoin increased, declining 0.07% to trade at $57,899. During that time, significant altcoins like Solana and Ether also had drops of 0.80% and 5.35%, respectively. Equities indices saw a decline at the close of trading on Thursday, mirroring the decline in the cryptocurrency market. At Thursday’s close of business, the S&P 500 and the Nasdaq Composite were down 0.88% and 1.95%, respectively. This reaction runs counter to the popular wisdom that suggests stocks should rise in response to rate-cut announcements.
Powell’s Testimony and Falling Inflation: Green Light for Rate Cut
This week, the U.S. Federal Chair Jerome Powell‘s testimony before Congress, in which he stated that recent economic data shows “modest further progress” on inflation, and the Consumer Price Index (CPI) reading that was lower than expected on Thursday provided market participants with two positive indicators that support the case for the start of a rate-cutting cycle.
Powell’s remarks were reinforced by the most recent CPI data, which was announced on Thursday. June inflation dropped to -0.1% from an expected +0.1%. This lowers inflation year over year to 3.0%, which opens the door for Powell to start loosening his punitive measures. Interest rate traders have raised the likelihood of a rate drop occurring in September from 68.1% on Thursday to 88.1% today, using the Chicago Mercantile Exchange FedWatch tool.
FAQ
Why are Bitcoin and Ether Falling?
Bitcoin and Ether are losing value due to the sell-off in equities and investors’ risk aversion. Market volatility and macroeconomic factors also play a role.
Why is the Sell-off in Stocks Affecting Cryptocurrency Markets?
The sell-off in equities could also lead to a sell-off in cryptocurrency markets, increasing investors’ risk aversion. This could cause digital assets like Bitcoin and Ether to lose value.
How do Rate Cut Expectations Affect Bitcoin and Ether?
Expectations of a rate cut can often have a positive impact on cryptocurrency markets, as low interest rates can drive investors into riskier assets. However, current market conditions and other factors can also determine this effect.
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