The cryptocurrency market has been under pressure recently, with a 1.38% decline in the past 24 hours and a 21% drop over the past month.
This decline is indicative of the wider economic problems, such as ETF outflows, leveraged liquidations, and an overall risk-off mood floating over to the equities market. As of today, cryptocurrencies have a market capitalization of $2.87 trillion.
Crypto Market Struggles With ETF Outflows and Liquidations
The mass withdrawal of the funds held by the crypto ETFs is one of the main causes of the ongoing downturn in the market. Clearly, a significant portion of the panic selling has been on the part of the retail investors, as more than $3 billion has been withdrawn from crypto ETFs this month alone.
This strain has been worsened by the unsurvey of leveraged positions where liquidations have amounted to more than $2billion in a period as short as 24 hours. Bitcoin price has not been doing well since dropping to the major support of $85,000 and being stuck at around $84,000.
This reduction is within a bigger bearish trend, characterized by decreasing highs, large downplay candles, and an increase in volatility.
Ether price has been resilient to the extent that it has been able to stabilize at a low point of under $3,000. Currently, ETH is trading at approximately $2,728. Nevertheless, other altcoins such as XRP, Solana, and Cardano have been moving bearish, and have not gone above areas of critical support since the market outlook is still mostly negative.
Fed Rate Cut Expectations Fuel Optimism
However, the crypto market remains optimistic because of the prospects of a rate reduction by the Federal Reserve in December. The recent economic statistics of the U.S. have shown high job creation, and this has raised the anticipation that the Fed will reduce the cost of borrowing.
The CME FedWatch Tool indicates an increased likelihood of a rate reduction to 71%. This possible change in monetary policy is deemed to be good news to Bitcoin and other cryptocurrencies, as reduced rates may increase investor confidence in riskier assets.
The publication of some crucial employment numbers has brought some light after a six-week break in economic data occasioned by the U.S. government shutdown. The statistics indicated that the U.S. employers put 119,000 jobs in September, which was way beyond what the expectations had.
Although the rate of unemployment has increased marginally to 4.4, the general employment situation is said to be on strong grounds, and this has influenced most economists to believe that the Fed might proceed with a rate cut in the next month.
What’s Next For Crypto Market?
As the chances of a Fed rate cut increase, the cryptocurrency market starts revealing signs of optimism. Analysts are optimistic that Bitcoin would recover strongly, possibly rising above the $90k and even $100k in case the Fed takes measures to lower the rates in December.
The possible reduction in the rate would be a ripple effect in the crypto market and would increase investor confidence, pushing prices up on leading cryptocurrencies.
