Bitcoin Slips Below $89,000 Amid Fed’s Ambiguous Rate Cut Strategy
Bitcoin’s recent decline has continued, falling to approximately $88,600 on Wednesday. This marks its lowest point since April 2023 and represents a drop of over 5% from the start of the year. The cryptocurrency’s downturn coincides with the Federal Reserve’s release of its October meeting minutes, which highlighted a divided stance on the outlook for interest rates and economic risks.
Federal Reserve’s Impact on Bitcoin
The meeting minutes noted “two-sided risks” facing the economy. Officials expressed concerns over slower job growth, a rising unemployment rate, and a decrease in labor demand. These factors suggest that the economy is increasingly vulnerable to a downturn.
Despite these cautionary signals, many officials remain wary about easing policy. They pointed to persistent inflation, particularly in tariffs and service sectors, as a reason to delay significant rate cuts. The meeting’s discussions indicated a lack of consensus: while some officials advocate for additional rate cuts, others argue for maintaining current rates.
Rate Cut Predictions and Market Reactions
- Probability of a quarter-point cut at December’s meeting decreased from 52% to 30% following the minutes release.
- Expectations for no change rose from 46% to almost 70%.
This uncertainty surrounding interest rates has intensified challenges for Bitcoin and other cryptocurrencies. K33 Research analyst Vetle Lunde labeled the current derivatives market for Bitcoin as “dangerous.” Traders are aggressively leveraging positions amidst a continuing market correction.
Current Market Conditions
Open interest in perpetual futures has surged by over 36,000 BTC, indicating rising speculation. Funding rates have turned positive, reflecting anticipated rebounds that have not yet occurred. However, Lunde noted that such behavior resembles past trends that often resulted in further declines.
He estimates that Bitcoin could see bottoming out around the $84,000 to $86,000 range. However, if selling pressure accelerates, it risks dropping toward April’s low of $74,500.
Other Cryptocurrencies Under Pressure
- Ethereum has fallen to about $2,870, its first sub-$3,000 price since July 2023.
- XRP has dipped toward the $2 mark, a low not seen in around five months.
In summary, the interplay between the Federal Reserve’s uncertain rate strategy and Bitcoin’s decline is shaping the current cryptocurrency landscape. Investors and traders alike are advised to remain vigilant as market dynamics evolve.
