Bitcoin’s price experienced a decline on Tuesday, retreating from recent gains as market speculation intensified regarding a slower reduction in U.S. interest rates than previously expected.
This risk-averse sentiment in the broader financial markets, particularly within the stock sector, had a ripple effect on cryptocurrency prices. Traders remain on high alert ahead of upcoming signals from the Federal Reserve and crucial inflation data set to be released this week.
By 01:07 ET (05:07 GMT), Bitcoin had dropped 1.4%, settling at $62,609.1.
Stronger Dollar and Rate Cut Expectations Weigh on Bitcoin
The strength of the U.S. dollar has also contributed to the downturn in crypto markets, as the currency hovers near its highest levels in seven weeks. This surge followed last week’s nonfarm payrolls data, which indicated a resilient labor market, potentially leading to a more gradual approach to rate cuts by the Fed.
Current trader expectations show an 81% likelihood of a 25 basis point cut in November, with a 19% probability of rates remaining unchanged, according to the CME Fedwatch tool. Additionally, traders are adjusting their positions in anticipation of a higher terminal rate.
A slower trajectory for rate cuts suggests that U.S. interest rates may remain elevated for an extended period, posing challenges for speculative assets, including cryptocurrencies.
Upcoming Federal Reserve Insights and Inflation Data
Attention this week centers on obtaining further guidance regarding U.S. interest rates, with the minutes from the Fed’s September meeting set to be released on Wednesday. Although the central bank implemented a 50 basis point cut, it indicated that future rate adjustments would be data-dependent.
Key consumer price index inflation data is scheduled for release on Thursday, which could significantly influence interest rate projections. Additionally, several Federal Reserve officials are slated to speak in the coming days, potentially offering further insights.
Altcoin Market Retreats Following Bitcoin’s Lead
In the broader cryptocurrency market, most altcoins mirrored Bitcoin’s decline, reversing gains made over the weekend. Ethereum, the second-largest cryptocurrency, saw a 2.7% drop to $2,420, while other notable coins like SOL, XRP, and ADA experienced losses ranging from 2% to 4%. MATIC fell slightly by 0.2%, and among meme tokens, DOGE dropped nearly 5%.
Despite recent setbacks, the crypto market has seen gains in previous sessions, buoyed in part by increasing speculation around a potential Donald Trump victory in the 2024 presidential election. A recent poll from crypto betting platform Polymarket indicated Trump leading Vice President Kamala Harris by 53% to 46.2%. Trump’s pro-crypto stance contrasts with Harris’s expected regulatory approach, adding further complexity to the market landscape.
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