Bitcoin Enters Bear Market Territory as Risk Appetite Fades
The world's largest cryptocurrency, Bitcoin, experienced a significant downturn on Friday, plummeting to its lowest value in six months. This sharp decline occurred within a broader sell-off of risk-sensitive assets, primarily driven by diminishing expectations that the Federal Reserve will implement a U.S. interest rate cut in its upcoming policy meeting.
The price of Bitcoin fell 2.3% to $96,564 in early afternoon trading, after earlier hitting a low of $95,885.33. This marks the digital currency's weakest performance since May 7. Ether, the second-largest cryptocurrency, also felt the pressure, dropping to a 10-day low before stabilizing at $3,175.22.
Federal Reserve Policy Shift Sparks Market Anxiety
The recent pressure on risky assets, including cryptocurrencies, intensified as hopes for a Fed rate cut next month rapidly evaporated. A growing chorus of central bank policymakers has signaled a preference for maintaining the current interest rate environment. Markets now price in only a 40% chance of a December rate cut, a dramatic drop from approximately 90% earlier this month and over 60% at the start of the week.
Kansas City Fed President Jeffrey Schmid, a voting member on the policy-setting Federal Open Market Committee, publicly expressed his reservations. He stated that his concerns about 'too hot' inflation extend far beyond the narrow impacts of tariffs alone.
Record Profit-Taking and Massive ETF Outflows
According to Dave Rosenberg of Rosenberg Research, Bitcoin is now in 'official bear market terrain', having declined by more than 20% in just over a month. This bearish sentiment is further confirmed by massive redemptions from Bitcoin-related exchange-traded funds (ETFs), which saw outflows totaling a staggering $870 million on Thursday alone.
Data from research firms paints a clear picture of the sell-off. Long-term Bitcoin holders have significantly accelerated their profit-taking. Crypto research firm Glassnode confirmed this trend, while data from CryptoQuant showed that these holders have sold 815,000 Bitcoin over the past 30 days, a record high since January 2024.
The overall backdrop for the crypto market remains decidedly bearish. Since its peak on October 7, the total cryptocurrency market capitalization has collapsed by more than $1 trillion, representing a 24% loss. As Juan Perez, Director of Trading at Monex USA, explained, 'If there is no enthusiasm toward risk-taking, it seems like that also translates into hesitation with bitcoin and the like.' This confirms that cryptocurrencies continue to move in correlation with traditional risk assets like equities, rather than acting as an alternative safe haven during times of market fear.
