Bitcoin drops 5% amid Fed rate cut expectations

Bitcoin has been 13% lower in the past week, which puts it in similar territory to the aftermath of the FTX collapse

Bitcoin was down 5% amid increased expectations for Fed rate cut in September.

Nearly every constituent in the CD20 is in the red, posting bigger losses than bitcoin. Ether (ETH) is 5.8% lower, Solana (SOL) down 7.8%, and XRP down 7%. According to CoinGlass data, there has been $175 million in long liquidations over the past 24 hours.

Bitcoin has been 13% lower in the past week, which puts it in similar territory to the aftermath of the FTX collapse.

Stronger than expected U.S. jobs data, but a rising unemployment rate has pencilled in a Fed rate cut for September, as per a recent note by ING.

ING’s James Knightley wrote that private sector job growth has been particularly weak, with just 136,000 new jobs added in June, below the 160,000 expected. Government, education, and healthcare services contributed around 60% of new jobs, while retail, temporary help, professional business services, and manufacturing all saw job losses.

Citi Research is making a more aggressive prediction, writing in a recent note that it is forecasting eight Fed rate cuts starting in September 2024 through July 2025, reducing the benchmark rate by 200 bps to 3.25%- 3.5%.

Bettors on Polymarket are punting that the Federal Reserve will have 1-2 rate reductions by the end of the year, with a 34% probability of 1 cut and a 37% probability of 2.

The dovish Fed expectations also failed to lift Asian stocks as the EU’s decision to impose steep tariffs on the import of Chinese EVs dampened the sentiment. Elsewhere, French voters gave leftists more seats than far right but failed to secure a majority, leaving a potentially hung parliament, a recipe for political and policy paralysis and potential risk aversion in European markets.