Bitcoin Plunges Below $102K Amid Weak U.S. Demand, Fed Divided on December Cut
Overnight crypto gains receded during U.S. morning hours as Bitcoin dropped below $102,000, alongside declines in major cryptocurrencies like Ether and Solana. Crypto-related U.S. stocks, including companies like Circle and Bitfarms, saw significant losses between 5%-10%. Weak U.S. investor appetite is highlighted by the extended negative Coinbase Premium Index, marking the longest streak since April's Bitcoin correction. Meanwhile, uncertainty over the Federal Reserve's monetary policy, with divided opinions on potential rate cuts amid inflation and labor market concerns, has added to market volatility. Since October, U.S.-listed Bitcoin ETFs have faced $1.8 billion in net outflows, reflecting ongoing hesitation in the crypto market.
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Bitcoin's Overnight Gains Wiped Out
Overnight crypto gains once again evaporated by U.S. morning hours as bitcoin (BTC) tumbled back below $102,000 on Wednesday. Briefly topping $105,000 earlier today, the largest crypto nosedived 3% in just a couple of hours as U.S. traditional markets opened. It wasn't just bitcoin; ether (ETH) fell almost 5% below $3,400 during the same period, while Solana (SOL), XRP, and other major altcoins suffered similar declines.
Crypto-Related Stocks Under Pressure
Crypto-related U.S. stocks are also taking a beating in the early session. USDC stablecoin issuer Circle (CRCL) dropped 9.5% after its third-quarter earnings report, while crypto miners with data center ambitions, including Bitfarms (BITF), Bitdeer (BTDR), Cipher Mining (CIFR), Hive Digital (HIVE), Hut 8 (HUT), and IREN, continued selling off, declining 5%-10%.
Weak U.S. Appetite for Bitcoin
Lackluster price action during U.S. trading hours has been a consistent theme in recent weeks on the crypto markets. Highlighting weak American investor interest is the so-called Coinbase Premium, a popular gauge for U.S. investor demand that has been negative since late October.
The Bitcoin's Coinbase Premium Index, which measures the price difference for spot BTC on Coinbase (a widely-used exchange in the U.S.) versus Binance (preferred by offshore retail traders), is experiencing its weakest streak since the April correction. This is the metric's longest negative streak since March-April, when BTC fell to $75,000 from above $100,000 in a broad market downturn.
Division Among Fed Policymakers on Rate Cuts
The shift in U.S. sentiment coincides with growing uncertainty surrounding the Federal Reserve's next move following its October meeting. Before the meeting, there was an expectation for a rate cut in December, but this has turned into an internal debate among policymakers.
According to a recent Wall Street Journal report, the central bank is divided over whether the greater risk lies with persistent inflation or a softening labor market. This uncertainty has made the possibility of a December rate cut far less certain than it was just weeks ago.
Impact of Government Shutdown on Policy Decisions
The recent U.S. government shutdown has compounded challenges for Federal Reserve policymakers by temporarily halting key employment and inflation data releases, forcing reliance on private datasets and anecdotal evidence.
A rate cut in December is now considered a "tossup." Even if a cut happens, it may come with guidance suggesting a higher bar for future reductions, the report noted.
Outflows from U.S.-Listed Bitcoin ETFs
Since the Federal Reserve's October meeting, U.S.-listed spot Bitcoin ETFs have seen more than $1.8 billion in net outflows, showcasing the impact of uncertainty surrounding the Fed's decisions. The lack of clear positive catalysts continues to keep BTC prices on edge.