Bitcoin and other cryptocurrencies experienced a drop in prices on Monday, as macroeconomic factors weighed on risk-sensitive assets. The price of Bitcoin fell 2% in the past 24 hours, dipping below the key $26,000 level that has provided support for the largest digital asset in recent weeks. This decline comes after Bitcoin briefly traded above $27,000 last week but failed to hold onto those gains.
Trading volumes and volatility for cryptocurrencies remain historically low, signaling diminishing investor interest in the space known for its wild price swings. While crypto traders are eagerly awaiting a decision from the Securities and Exchange Commission on spot Bitcoin exchange-traded funds (ETFs), it could be several months before this catalyst materializes.
Bitcoin, like the Dow Jones Industrial Average and the S&P 500, has been influenced by macro catalysts that could impact the outlook for interest rates. With interest rates already at a generational high, higher returns on risk-free cash or government debt provide less incentive for investors to allocate funds to riskier assets like Bitcoin. Therefore, the question of whether the Federal Reserve will raise interest rates in November and when it may lower rates becomes crucial.
Economic data takes center stage in this scenario, as strong indicators of the U.S. economy are unlikely to push the Fed to lower rates, while signs of weakness could prompt a more accommodative stance from the central bank.
In addition to Bitcoin, other cryptocurrencies also experienced losses. Ether, the second-largest crypto, dropped 1.5% to $1,575. Smaller tokens, or altcoins, such as Cardano and Polygon, were also weak, with declines of 1% and 2% respectively. Memecoins like Dogecoin and Shiba Inu also saw price decreases, with drops of 2% and 1% respectively.
The week ahead will provide key economic data, including the Dallas Fed manufacturing activity data for September and the Chicago Fed national activity index for August. Market participants will eagerly await Thursday’s revisions to U.S. gross domestic product over the past five years and the Fed’s preferred inflation measure, the personal-consumption expenditures index, which is due on Friday.
While the cryptocurrency market faces downward pressure and uncertainty, investors will closely monitor macroeconomic developments and central bank decisions to gauge the future direction of digital assets.
Disclaimer: The above information is for informational purposes only and should not be considered as financial advice. Investing in cryptocurrencies involves risk, and individuals should conduct their own research and consult with a financial advisor before making any investment decisions.