Bitcoin Drops Below $108K as Fed Rate-Cut Expectations Fade

Bitcoin prices fell below $108K as anticipation for Federal Reserve rate cuts wanes, with the next cut not expected until September. Risk assets like crypto show signs of volatility weakness, with fewer bullish catalysts apparent. Analysts warn that current labor market sentiment could spark an unemployment spike, influencing potential Fed action.

Bitcoin’s value dropped below $108,000, marking another dip as expectations for Federal Reserve interest rate cuts seem to fade. As of May 28, during the Wall Street opening, BTC’s retreat was tied to a reduction in rate cut forecasts, with the only anticipated cut now pushed to September. And while crypto enthusiasts are usually resilient, there wasn’t an apparent positive spark for risk assets at the moment, leaving traders wary.

Despite ongoing discussions about potential weaknesses in the labor market, crypto and other risk assets have struggled to find a bullish catalyst lately. Data from Cointelegraph Markets Pro alongside TradingView displayed the BTC/USD pair declining toward troubling multiday lows. There’s a general sentiment of caution ahead of the upcoming release of the Federal Reserve’s minutes from their last meeting.

According to CME Group’s FedWatch Tool, the probability for rate cuts is dwindling, which has typically supported assets like stocks and cryptocurrencies. Prediction service Kalshi indicates a drop in expected cuts for 2025, from four earlier this year down to just two now. The market’s index is reflecting a growing apprehension as we await crucial Fed communications.

The Kobeissi Letter, a trading resources platform, did note one potential bright spot in the analysis. They observed that consumer sentiment regarding job availability might be pointing at an impending spike in unemployment — a scenario that could push the Fed toward considering earlier rate cuts. They remarked, “The assessment of current job availability has also decreased over the last 3 years… This indicator clearly suggests a further increase in the unemployment rate in the coming months.”

As Bitcoin continues on this downward path, it cut through bid liquidity, which seasoned trader TheKingfisher had previously warned about. A crucial pressure point is forming; should BTC breach this area, it could spell further declines. “However, the more striking feature is the massive wall of short liquidations immediately above,” he stated, highlighting looming barriers at $109,000-$109,200.

Bitcoin’s been relatively rangebound since its peak at $112,000, with analysts from QCP Capital observing that the absence of a solid catalyst means price breakouts seem unlikely. They noted in a telegram dispatch, “Volatility across most asset classes continues to drift lower… markets appear increasingly inured to negative developments.” While the news cycle churns on, traders are cautiously brushing off narratives that might have previously ignited strong reactions.

Lastly, while the market remains uncertain, it’s worth reminding readers this article does not offer any investment advice. Each trading decision carries risk, and individuals should always do thorough research before entering the market.

In summary, Bitcoin’s recent decline below $108K coincides with diminishing hopes for Fed rate cuts, pushing the market into a cautious tone. Recent analyses suggest that while economic pressures loom, risk assets, including cryptocurrencies, lack a strong catalyst for recovery. As uncertainty reigns, the dynamics point toward a potentially turbulent trading future, with many investors on alert for any signs of change.

Original Source: cointelegraph.com