Bitcoin Tumbles to $53K, Ether Turns Negative for 2024

Over the past weekend, the massive sell-off in cryptocurrencies intensified on Sunday evening US time, sending Bitcoin (BTC) to levels not seen since February and Ethereum (ETH) back to prices not seen since December.

The trigger for what has now become a massive correction in cryptocurrency and traditional markets could only have been the Bank of Japan, which raised its benchmark interest rate last week. This tightening of monetary policy led to a sharp rise in the national currency, the yen, and a fall in Japan’s Nikkei stock index. Having fallen another 6% early Monday, the Nikkei has lost about 15% over the past three sessions and 20% from its mid-July peak.

The negative sentiment in Japan has spilled over to the US, where the Nasdaq has fallen more than 5% over the past two trading sessions last week. Nasdaq futures closed down 2.5% on Sunday evening.

In addition to the somewhat unexpected hawkishness of the Bank of Japan last week, the US Federal Reserve also surprised quite a bit – not by keeping rates on hold, but by being somewhat ambivalent about a rate cut in September that almost everyone in the market had considered a sure thing.

Whether the Fed made a strategic mistake remains to be seen, but for now, markets are setting their agenda.

Traders have priced in a 100% chance of a US rate cut in September, with a 71% chance of a 50 basis point cut and only a 29% chance of a 25 basis point cut.

Looking across the maturity curve, the yield on the 10-year US Treasury note fell to 3.75% on Sunday night from 4.25% just a week ago, 150-175 basis points below the Fed’s current target of 5.25%-5.50%.