Summary
- Using the CME FedWatch Tool, futures trading data indicated a high likelihood of a rate cut.
- The Conference Board’s Expectations Index, a gauge of economic sentiment, stayed below the level that usually signals an upcoming recession.
- Bitcoin remains significantly below its recent all-time high set earlier this month.
The Federal Reserve reduced interest rates by 0.25% on Wednesday, a widely anticipated move that left the cryptocurrency markets largely underwhelmed. Prices dropped further when Fed Chair Jerome Powell stated that a rate cut in December was “not guaranteed.”
Bitcoin was trading at approximately $110,700, reflecting a 1.3% decline over the previous hour. The leading cryptocurrency has dropped over 10% after previously falling below $105,000. Ethereum, the second-largest digital asset, was priced around $3,890, showing a 2.7% decrease in the same timeframe.
On Tuesday, the CME FedWatch Tool revealed a greater than 99% prediction for the recent rate cut and a more than 90% chance of another 0.25% reduction in December.
“The decision to reduce the federal funds rate by 25 basis points was widely expected,” noted Gerry O’Shea, head of global market insights at Hashdex. He remarked to Decrypt that Bitcoin and other digital assets reacted negatively after Powell’s comments on the meeting suggesting further rate cuts were uncertain.
O’Shea added that upcoming events, including “government shutdowns, tariff policies, and large tech company earnings,” may impact prices more significantly this week.
Following the recent job statistics and economic indicators suggesting a slowing U.S. economy, central bankers lowered the rate for overnight lending to a range of 3.75% to 4%. The Federal Reserve noted that in light of risk adjustments, the reduction was necessary.
The Conference Board’s Expectations Index remains below the recession warning line, while Fed concerns have taken precedence over persistent inflation rates, which have stayed above the target of 2%. The Consumer Price Index rose 3% over the last year, continuing a disturbing upward trend.
