Bitcoin and Ether Prices Drop 5% Before Expected Federal Reserve Interest Rate Reductions

Bitcoin experienced a 3% decline at the beginning of the week, dropping below the $58,400 mark. This decrease occurred amidst speculations about a potential rate cut by the U.S. Federal Reserve, impacting market sentiment.

In contrast, U.S.-listed Bitcoin ETFs observed substantial inflows on Friday, totaling over $263 million, marking the highest inflow since July 22. Similarly, Ether ETFs also saw inflows, albeit on a smaller scale at $1.5 million, indicating sustained investor interest in crypto assets.

Over the weekend, Bitcoin traded mostly above $60,000 following a surge late Friday driven by positive U.S. data. U.S.-listed BTC ETFs recorded significant net inflows, while Ether ETFs saw inflows for the second consecutive day since August 28.

However, the crypto markets experienced a downturn on Monday as Asian exchanges commenced trading, setting the stage for a crucial week where traders globally anticipated the Federal Reserve’s first rate cuts in over four years. Polymarket bettors assigned a 51% probability to a 50 basis points rate cut, a 48% chance to a 25 basis point cut, and only a 2% likelihood of no change.

Historically, a shift towards lower borrowing costs has fostered bullish sentiment among traders as it provides affordable access to capital, fostering growth in riskier sectors.

Among major cryptocurrencies, Ether faced the most significant losses with a 5.5% decline in the past 24 hours, marking its most substantial single-day drop since early August. Other cryptocurrencies such as Cardano’s ADA and Solana’s SOL experienced losses of 5% and 4%, respectively, while BNB Chain’s BNB emerged as the top performer with a modest 1.1% loss.

Nervos’ CKB stood out as one of the few gainers, registering a notable 10.5% surge in the last 24 hours, buoyed by positive sentiment following its listing on the Korean exchange Upbit, known for its affinity for memecoins.

Futures traders, anticipating higher prices, incurred losses exceeding $143 million during the sudden market downturn, as per CoinGlass data. Additionally, the widely monitored BTC/ETH ratio, tracking the relative movement of the two leading tokens, plummeted to four-year lows.

Ethereum faced stiff competition over the past year, particularly from Solana, which has become a favored platform for launching memecoins. New chains like Base and Telegram-affiliated (TON) have also gained traction, potentially impacting the demand for ETH.

Sony’s Soneium and Circle’s announcement regarding the availability of USDC on the chain hint at potential competition for Ethereum, although specifics about the issuance remain undisclosed.