Bitcoin drops 3%, Ether falls 6% ahead of Fed, BoE and BoJ interest rate decisions

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Bitcoin (BTC) fell 3% while Ethereum (ETH) fell 6% over the past 24 hours, ahead of a critical week in which central bank interest rate decisions will be in focus. The total cryptocurrency market cap currently stands at $2.12 trillion, down 4.5% in one day.

Volatility returned at the end of the week as Bitcoin fell to a low of $58,200 before recovering slightly to trade above $58,600. data According to CoinGecko, the market remains divided, with bulls and bears fighting over the future direction of Bitcoin.

As Bitcoin retreated, altcoins began to sink. Over the past 24 hours, Ethereum has fallen by as much as 6% to around $2,300, while Solana (SOL), Doge (DOGE) and Ripple (XRP) have each fallen by around 5%.

Among the top 100 crypto assets, Injective (INJ), Internet Computer (ICP), Pepe (PEPE) and Ondo (ONDO) saw the biggest losses, averaging 7%, the data shows.

The cryptocurrency market is bracing for increased volatility as the Federal Reserve (Fed) rate decision draws closer. Economists warn that a 25 basis point rate cut may lead to a “sell the news” event as the market has already priced in this adjustment.

Market sentiment regarding the Federal Reserve's upcoming interest rate decision has changed dramatically. CME FedWatch Tool It now shows a 41% chance of a 25 basis point cut and a 59% chance of a 50 basis point reduction.

The odds of the latter happening were just 30% last week and were barely on par with the odds of a 25 basis point cut yesterday.

Market participants appear to be in favour of a 50 basis point cut. In such a scenario, economists' expectations are mixed.

Johns Hopkins University economist Steve Hanke said The Bloc believes that a 50 basis point reduction could boost the cryptocurrency market.

“…a 50 basis point cut has not been contemplated. If it were to materialise, it would probably give a boost to the market,” he said.

However, an aggressive cut could signal a troubled economy, which could offset optimism about rate cuts. According to 21Shares research analyst Leena ElDeeb, a potential recession could trigger sell-offs in “risk assets in the near term.”

The Fed is expected to make its key decision on Wednesday, September 18. A rate cut would reverse the tightening cycle that began in 2022 and mark the first reduction since 2020.

In addition to the US central bank, attention is also focused on interest rate decisions by the Bank of England and the Bank of Japan.

The Bank of England is also due to announce its next interest rate decision on 19 September. The meeting follows the recent cut in bank rates from 5.25% to 5% on 1 August, marking the first reduction since the start of the tightening cycle at the end of 2021.

Policy committee members say they are closely monitoring the potential for inflation to persist even after inflation has declined to target levels.

The Bank of Japan is scheduled to announce its interest rate decision on Sept. 19. The meeting will be closely watched as the bank has maintained a restrictive monetary policy for years, with negative interest rates and yield curve control measures.

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