(Bloomberg) — Bitcoin fell in value ahead of the widely expected Federal Reserve rate cut, a policy change set to take effect later this week that has kept global markets on edge.
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The largest digital asset fell as much as 2.8% on Monday before paring some of its swings to trade at $58,633 at 7:03 a.m. in London. Tokens including second-best Ether and meme-crowd favorite Dogecoin also suffered losses.
The first U.S. rate cut in more than four years heralds looser financial conditions, typically a bullish backdrop for riskier assets like cryptocurrencies. But investors are uncertain about the size of the move expected on Wednesday, and how markets will react to updated forecasts from Fed officials — the so-called dot plot — and Chairman Jerome Powell’s briefing.
“The cut is less significant than the signaling during the press conference and the release of the updated dot plot,” said Sean McNulty, director of trading at liquidity provider Arbelos Markets. “If the guidance and press conference are significantly dovish, we expect Bitcoin to outperform the highs.”
Bitcoin’s latest decline follows a 10% jump in the seven days through Sunday, the biggest weekly rally since July — that upward push may have reflected renewed bets on a 50 basis point rate cut by the Fed. Officials are forecast to cut borrowing costs by at least 25 basis points at the upcoming policy meeting.
In the Bitcoin options market, “traders are pricing in significantly more event weight than we’ve seen in recent memory” for the Fed meeting, said Caroline Mauron, co-founder of Orbit Markets, a liquidity provider for digital asset derivatives trading.
The outlook for monetary policy has likely emerged as the cryptocurrency’s main short-term driver, overshadowing — at least for now — the twists and turns in the US presidential election.
In the latest election drama, former President Donald Trump escaped unscathed after another apparent assassination attempt. The Republican candidate’s Secret Service unit opened fire on a man carrying an assault rifle at his golf course in West Palm Beach, Florida, on Sunday.
Trump has embraced the digital asset industry in search of donations and votes in a tight race with Democratic rival Vice President Kamala Harris. His defiant response to an assassination attempt in July sent Bitcoin soaring at the time, on speculation that his re-election chances had improved.
Bitcoin hit a record $73,798 in March, fueled by demand for specialty U.S. exchange-traded funds. Inflows into the products have moderated since then.
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