Bitcoin sinks to a six month low as rate cut hopes fade

Bitcoin has fallen to its weakest level in six months after a sharp and widespread sell-off in risky assets. The drop came on Friday as hopes for an interest rate cut by the U.S. Federal Reserve faded, leaving investors nervous and pulling money out of markets that usually rely on confidence and optimism.

Bitcoin has always been sensitive to the mood in the wider financial world. When investors feel safe and stocks are rising, bitcoin usually rises too. But when fear increases, crypto often drops even faster. That pattern played out clearly this week.

U.S. stocks were also under pressure, though the selling slowed a bit later in the afternoon. Even so, traders stayed extremely cautious. This comes as the government finally reopened after a record forty-three day shutdown, and markets now wait for a large batch of economic data due next week. Many investors want clarity on whether the economy is slowing, stabilising or heating up again.

Juan Perez, director of trading at Monex USA, said bitcoin still behaves like a typical risky investment. It hasn’t yet become a safe place for investors to hide during uncertain times. According to him, when people avoid risk, they also tend to avoid Bitcoin. With confidence dropping, demand for crypto naturally weakens.

“Bitcoin and crypto have generally enjoyed a positive correlation with good times in equities, so it has not become an asset of alternative value to hedge against fear in other sectors,” said Juan Perez

One of the biggest reasons behind the sell-off is the declining expectation of an upcoming interest rate cut. For weeks, investors believed the Fed would lower rates at its next meeting. Lower rates usually boost cryptocurrencies. But many Federal Reserve officials have recently signalled that cutting rates too soon might be dangerous because inflation is still running too high.

Kansas City Federal Reserve President Jeffrey Schmid, a voting member of the Fed’s policy committee, became the latest voice expressing hesitation. He said inflation remains “too hot” and that his concerns go far beyond just the impact of tariffs. His comments pushed expectations for a December rate cut even lower. At the start of the month, markets expected a rate cut with around ninety per cent confidence. That probability has now dropped to about forty per cent.

Due to this uncertainty, Bitcoin slid 2.3 per cent on Friday afternoon, trading around ninety-six thousand five hundred sixty-four dollars. Earlier in the day, it dipped to ninety-five thousand eight hundred eighty-five dollars, its lowest point since May seventh. Ether, the second-largest cryptocurrency, was flat at around $3,175 after hitting a recent ten-day low.

The broader outlook for bitcoin remains weak. Dave Rosenberg of Rosenberg Research said bitcoin is now officially in a bear market since it has dropped more than twenty per cent in just over a month. He also highlighted a major red flag: exchange-traded funds tied to bitcoin saw massive withdrawals, with investors pulling out eight hundred seventy million dollars on Thursday alone.

The entire crypto market has been hit hard. Since peaking on October seventh, total crypto market value has fallen by more than one trillion dollars, a twenty four cent decline.

Another worrying sign comes from long-term bitcoin holders. These are investors who usually hold their coins for months or years and rarely sell unless they see major opportunities. According to the research firm Glassnode, these long-term holders have sharply increased their selling. Data from CryptoQuant shows they sold a record eight hundred fifteen thousand bitcoin in the past thirty days, the highest level since January 2024. This kind of selling typically adds even more downward pressure on prices.

For now, the mood around bitcoin remains cautious. With rate-cut expectations shrinking, inflation still high, and investors becoming increasingly nervous, many analysts believe the crypto market could stay under pressure until the Federal Reserve gives clearer signs of its next move.