11/21 update below. This post was originally published on November 20
Bitcoin and the wider crypto market have dropped sharply, reigniting bitcoin crash fears as a nightmare seems to be coming true.
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The bitcoin price has dropped to around $86,000 per bitcoin, down from $126,000 in October and hitting lows not seen since April when U.S. president Donald Trump’s trade tariffs sparked widespread market panic.
Now, as fears swirl of another $1 trillion bitcoin and crypto market sell-off, traders are scrambling to get ahead of the Federal Reserve after the delayed jobs data drastically reduced the possibility of a December interest rate cut—which had been expected to support risk assets like bitcoin.
11/21 update: The head of asset management giant Vanguard’s bond business, Sara Devereux, has warned the she expects the Federal Reserve to only cut interest rates one or two more times, dealing a blow traders who had hoped for as many as four rate cuts next year.
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U.S. Federal Reserve chair Jerome Powell is grappling with sticky inflation and a labor market that is holding up better than expected—putting pressure on the bitcoin price has traders clamour for interest rate cuts.
AFP via Getty Images
“Too many Fed cuts are priced into the market right now. The market is over-relying on that,” Devereux told the Financial Times. “Maybe we have one or two more cuts.”
Devereux added that by the “middle of next year,” the Fed could reach the “neutral” level of interest rates, in which borrowing costs neither accelerate nor slow growth.
The bitcoin price fallen sharply overnight, dropping toward $80,000 per bitcoin to hit its lowest since April and dragging down the wider crypto market as traders go “risk-off.”
“Bitcoin, which sits at the top end of the risk spectrum, extended a losing streak that’s been in motion since late October. If people have lost confidence in tech stocks, they certainly won’t have the confidence to speculate on cryptocurrency,” Dan Coatsworth, head of markets at AJ Bell, said in emailed comments.
“It also didn’t help that investors are struggling to predict what the Federal Reserve will do next with interest rates. Conflicting messages from central policymakers have left investors scratching their heads over whether rates will be cut next month or not. Markets are now expecting a 67% chance of no change at December’s meeting, whereas a month ago there was a 98% chance of a quarter percentage point cut.”
“U.S. job growth blew past expectations in September painting a rosy pre-shutdown picture and delivering the largest jobs gain in five months,” Isaac Stell, investment manager at Wealth Club, said via email.
The jobs data, originally scheduled for October 3 but delayed by the government shutdown, showed the economy added 119,000 jobs in September and is the latest snapshot of the labor market that Fed officials have when they meet to set interest rates on December 9.
“Despite the data already being out of date, this will be the only major jobs release prior to the Fed’s end of year meeting,” Stell said.
Earlier, minutes from the last Fed meeting showed officials were already divided about whether to cut or hold interest rates.
“Given the Fed minutes showed hesitancy within the ranks when it comes to a final interest rate cut in 2025, the strength of this jobs report will likely ensure nothing changes,” Stell said. “So, the sleigh bells will not be ringing this December at the Fed. Instead of a perfectly wrapped rate cut, the U.S. consumer is likely to be met with a lump of coal.”
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The bitcoin price has fallen sharply from its peak of $126,000 per bitcoin in October, sparking fears of a full-blown price crash.
Forbes Digital Assets
The odds of a December interest rate cut have fallen sharply in recent weeks, according to the CME’s FedWatch tracker, with traders now pricing the possibility of a rate cut at just 40% and delivering a serious blow to the bitcoin price and wider crypto market that is teetering on a knife edge.
“The crypto market remains pessimistic, reacting eagerly to negative news and quickly deflating on positive news,” Alex Kuptsikevich, FxPro chief market analyst, said in emailed comments, adding that “in such conditions, it is only a matter of days before the bears find stop-out levels, triggering a self-sustaining avalanche of sell-offs.”