Bitcoin prices have fallen since topping $48,000 in January, the highest levels since early 2022.
DreamstimeBitcoin and other cryptocurrencies fell Thursday, following stocks lower after the Federal Reserve pushed back against bets that it will cut interest rates as soon as markets had expected. Another major macroeconomic catalyst also is looming Friday.
The price of Bitcoin has fallen 2% over the past 24 hours to $42,150, having traded at two-week highs near $44,000 in recent days. The largest crypto remains above the psychologically important $40,000 mark but has failed to recapture levels above $48,000—the highest point since early 2022—notched amid mid-January’s trading frenzy over spot bitcoin exchange-traded funds (ETFs).
Declines across digital assets on Thursday follow the worst day for the stock market so far in 2024. After the Fed held interest rates steady in a monetary policy decision on Wednesday, Fed Chairman Jerome Powell pushed back against the prospect that a rate cut would come any time soon. The message clashed with investor expectations, as traders had been betting on a rate cut from the Fed as soon as March or May, but those wagers had been scaled back by Thursday.
“Interest rate bulls, many of whom have been calling for early and sustained rate cuts, effectively had their legs cut away from beneath them after that message,” said Steve Clayton, head of equity funds at broker Hargreaves Lansdown. “The market has had to push back expectations for the scale and pace of rate cutting through the rest of 2024.”
A shift in rate expectations has hit Bitcoin just like the Dow Jones Industrial Average and S&P 500. Cryptos are sensitive to borrowing costs just like other risk assets, such stocks, because higher rates give fewer incentives for investors to buy riskier bets like equities or tokens.
Friday could advance the narrative with the release of the U.S. jobs report for January . If the jobs report reveals weakness in the labor market, it could return support to bets of a Fed rate cut in March or May—but signs that the economy continues to run hot may only add more weight to Powell’s message that rate cuts could take months to materialize.
Beyond Bitcoin, Ether —the second-largest crypto—fell 2% to $2,270. Smaller tokens or altcoins also were weak, with Cardano down 2% and Polygon sliding 4%. Memecoins fared similarly, with Dogecoin and Shiba Inu shedding about 1% each.
Write to Jack Denton at jack.denton@barrons.com
