Bitcoin Trades Below $90,000 As Fed Rate Cut Hopes Fade; Ethereum, XRP, Dogecoin Struggle: Analyst Forecasts 'Healthy Recalibration' Next
News Summary
Leading cryptocurrencies fell further on Thursday alongside stocks, with Bitcoin sinking below $87,000 for the first time in seven months, trading 30% below its all-time highs set just six weeks ago. Ethereum briefly slipped below $2,800. The decline was primarily attributed to stronger US jobs data (non-farm payrolls jumped by 119,000 in September), which dampened market hopes for a Federal Reserve rate cut in December. Traders' expectation for a 25 basis point rate cut has fallen to 39%, down from 50% a week earlier, according to the CME FedWatch tool. The global cryptocurrency market capitalization fell below $3 trillion, declining 4.25% in the last 24 hours, with liquidations spiking to $821 million. Jamie Elkaleh, CMO at Bitget Wallet, noted the increased coupling of crypto with traditional finance as positive for long-term adoption, despite short-term pressure, forecasting a "healthy recalibration" to flush out speculative excess. On-chain firm CryptoQuant highlighted $2,800 as an important support level for Ethereum.
Background
The current year is 2025, with Donald J. Trump in his second term as US President. The Federal Reserve's monetary policy, particularly its interest rate decisions, significantly influences risk appetite across global financial markets, including cryptocurrencies. Robust jobs data typically signals a healthy economy, which can lead the Fed to maintain higher interest rates or delay cuts, thereby increasing the opportunity cost of holding riskier assets. During the Trump administration, while economic policies generally lean towards pro-business stances, the regulatory landscape for cryptocurrencies remains uncertain, contributing to market volatility. Bitcoin's 30% drop from its all-time high in just six weeks underscores the inherent high volatility and investor sentiment fragility within the crypto market, especially when macroeconomic headwinds intensify.
In-Depth AI Insights
Given President Trump's re-election and the increasing coupling of crypto with traditional finance, what are the implications for long-term crypto investment strategies? Erosion of traditional safe-haven narrative: Crypto's ability to act as a hedge against traditional market volatility is diminishing. Its strong correlation with jobs data and Fed policy means investors can no longer view it as a completely independent asset class. Heightened volatility in uncertain regulatory landscape: While generally pro-business, the Trump administration's stance on crypto regulation may remain ambiguous, potentially leading to greater market swings in the absence of clear guidance. The analyst's "healthy recalibration" could signify a painful deleveraging rather than a simple correction. Increased focus on macroeconomic indicators: Crypto investors must now, like traditional market participants, closely monitor non-farm payrolls, inflation reports, and Fed statements, as these factors will directly influence crypto valuations and market sentiment. Beyond Fed policy, what deeper factors might be driving the current "extreme fear" sentiment in the cryptocurrency market? Natural unwinding of speculative excesses: While Fed policy is the immediate trigger, Bitcoin's 30% drop from its all-time high in just six weeks suggests that there was likely significant speculative froth. The market is undergoing a structural deleveraging, not just a reaction to interest rate expectations. Lingering shadow of regulatory uncertainty: Despite crypto's perceived future potential, major global economies, including the US, have yet to establish comprehensive and favorable regulatory frameworks. This ongoing uncertainty limits deep institutional participation and exacerbates retail panic during downturns. Geopolitical risks and global liquidity tightening: The current global geopolitical landscape, coupled with general quantitative tightening by major central banks, is leading to a tighter global liquidity environment. This naturally results in capital flowing out of higher-risk asset classes, with cryptocurrencies often being the first to be affected. Can Ethereum's "important" $2,800 support level hold in the current macroeconomic environment? Historical support challenged by macro headwinds: While historical "realized price levels" often mark cycle bottoms, the strength of technical support will be severely tested under a macroeconomic backdrop where the Fed may maintain higher rates for longer, and rate cut expectations are broadly diminishing. Fundamental factors are gaining more influence over price. Decisive role of institutional capital flows: Whether the $2,800 support holds will depend on sufficient new institutional buying entering the market to absorb selling pressure from retail and speculative traders. Given crypto's increased link to traditional finance, institutional engagement will hinge on their assessment of the broader macroeconomic outlook, not just technical analysis. True depth of "healthy recalibration": If the market is indeed in a "healthy recalibration" phase, then support levels might be retested or even breached to more thoroughly flush out "speculative excess." Such a correction is part of the price discovery process, not simply a bounce signal.