(Bloomberg) — Bitcoin experienced a notable retreat ahead of an anticipated interest-rate reduction by the Federal Reserve, a pivotal policy shift set to be announced later this week, stirring uncertainty across global markets.
On Monday, Bitcoin slid up to 3.9%, settling at $57,505. Its counterparts, including Ether and the popular Dogecoin, also saw declines.
The imminent rate cut—the first in over four years—typically signals looser financial conditions, which generally benefit riskier assets like cryptocurrencies. However, investors are grappling with uncertainty over the extent of the cut expected on Wednesday, the impact of updated Fed projections (known as the dot plot), and the forthcoming briefing by Fed Chair Jerome Powell.
“The rate cut itself is less crucial than the guidance during the press conference and the updated dot plot,” noted Sean McNulty, director of trading at Arbelos Markets. “Should the guidance and press conference lean significantly dovish, Bitcoin might experience substantial upside.”
Bitcoin’s recent drop follows a robust 10% rally over the past week—the largest since July. This surge likely reflected renewed speculation about a potential 50 basis points rate cut by the Fed, with expectations for at least a 25 basis points reduction at the forthcoming meeting.
In the Bitcoin options market, traders are “pricing in a significantly larger event weight than we’ve seen recently” for the Fed meeting, remarked Caroline Mauron, co-founder of Orbit Markets, a digital-asset derivatives liquidity provider.
Currently, the outlook on monetary policy is arguably the primary short-term driver for cryptocurrencies, overshadowing, for the moment, the unfolding US presidential race.
In the latest political developments, former President Donald Trump survived an apparent assassination attempt. The Republican nominee’s Secret Service detail opened fire on an individual wielding an assault rifle at his West Palm Beach, Florida, golf course on Sunday.
Trump, seeking donations and support within the digital-asset sphere, has leveraged Bitcoin in his election campaign against Democratic rival Vice President Kamala Harris. His robust reaction to a previous assassination attempt in July led to a Bitcoin surge, fueled by speculation that his reelection prospects had improved.
Bitcoin hit a record $73,798 in March, spurred by demand for US exchange-traded funds. However, inflows into these products have since moderated.
