After scaling record heights in early October, bitcoin has come crashing back down some 25% in recent weeks after enthusiasm for the pro-crypto policies of President Donald Trump seemingly wore off.
The cryptocurrency was trading at around $95,000 on Monday morning, way down from the $126,251 high it reached on Oct 6. That marked a slight recovery from lows of around $93,000 on Sunday, but follows a roughly 10% drop over the course of last week.
Experts said traders have reacted to renewed uncertainty over whether the Federal Reserve will cut interest rates at its next meeting in December. Policymakers were left without key data releases, including those on jobs and inflation, during the 43-day government shutdown last month.
Fed chair Jerome Powell said after the last cut in October that “a further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”
Others have thrown further doubt on proceedings. Boston Fed President Susan Collins said last week that it will “likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks in this highly uncertain environment.”
The CME FedWatch tool was placing the probability of a December rate cut at 43% on Monday, down more than 10% since last week.
Henry Allen, an analyst at Deutsche Bank, warned not to “underestimate the impact” of the shift in sentiment from the Fed in recent weeks. “If we look at the biggest multi-asset sell-offs of the last decade, a consistent theme has been the Fed adopting a more hawkish posture and turning to rate hikes.”
Analysts chalked the drop up to institutions selling their crypto assets. Investors pulled about $1.8 billion from bitcoin and ethereum exchange-traded funds (ETFs) last week. That included about $870 million of bitcoin-related ETC outflows on Thursday alone.
Rachael Lucas, an analyst at BTC Markets, said it “signaled a clear risk-off shift from big money.”
Investors have also appeared to lose faith in Trump’s attempts to position the U.S. as the “crypto capital of the world.” Sentiment took a hit when Trump threatened an extra 100% tariff on Chinese imports, sparking huge liquidations across practically all major cryptocurrencies.
Stephen Innes, an analyst at SPI Asset Management, wrote that “a month after its euphoric highs, bitcoin’s Trump-trade sugar rush faded,” adding that crypto “feels like a passenger — not a driver” ahead of fresh U.S. economic data being released in the coming weeks that could swing the Fed’s decision either way over a rate cut or hold.
