Bitcoin Falls 3%, Ether Falls 6% Ahead Of Fed, BoE, BoJ Interest Rate Decisions

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Bitcoin (BTC) is down 3% while Ethereum (ETH) is down 6% over the past 24 hours, ahead of a critical week where central bank interest rate decisions will be in the spotlight. The global crypto market cap currently stands at $2.12 trillion, down 4.5% in a day.

Volatility returned at the end of the week as Bitcoin fell to a low of $58,200 before recovering slightly to trade above $58,600, data from CoinGecko shows. The market remains divided, with bulls and bears clashing over Bitcoin’s future direction.

As Bitcoin retreated, altcoins began to sink. Over the past 24 hours, Ethereum has fallen as much as 6% to around $2,300, while Solana (SOL), Doge (DOGE) and Ripple (XRP) have each fallen around 5%.

Among the top 100 crypto assets, Injective (INJ), Internet Computer (ICP), Pepe (PEPE) and Ondo (ONDO) posted the biggest losses, down 7% on average, the data shows.

The crypto market is bracing for more volatility as the Federal Reserve (Fed) rate decision approaches. Economists warn that a 25 basis point rate cut could lead to a “news sell” event because the market has already priced in that adjustment.

Market sentiment regarding the Fed’s upcoming interest rate decision has changed dramatically. The CME FedWatch tool now shows a 41% chance of a 25 basis point cut and a 59% chance of a 50 basis point cut.

Odds on the latter were just 30% last week and were on par with the odds for a 25 basis point cut yesterday.

Market participants appear to be in favor of a 50 basis point cut. In this scenario, economists’ expectations are mixed.

Johns Hopkins University economist Steve Hanke told The Block that a 50 basis point cut could boost the crypto market.

“… a discount of 50 basis points is not taken into account. If it were to materialize, it would probably give a boost to the market,” he said.

However, an aggressive cut could signal a troubled economy, which can counter optimism about rate cuts. According to 21Shares research analyst Leena ElDeeb, a potential recession could trigger selling of “short-term risk assets.”

The Fed is expected to make the key decision on Wednesday, September 18. An interest rate cut would reverse the tightening cycle that began in 2022 and mark the first rate cut since 2020.

Apart from the US central bank, eyes are also on interest rate decisions by the Bank of England and the Bank of Japan.

The Bank of England is also scheduled to announce its next interest rate decision on September 19. The meeting will follow the recent cut in Bank Rate from 5.25% to 5% on August 1, marking the first cut since the start of the tightening cycle. at the end of 2021.

Monetary policy committee members say they are closely monitoring the potential for inflation to persist even after inflation has been brought down to target levels.

The Bank of Japan is due to announce its interest rate decision on September 19. The meeting is closely watched as the bank has maintained a tightening monetary policy for years, with negative interest rates and yield curve controls in place.

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