Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin and other major cryptocurrencies experienced a significant downturn on Thursday, with liquidations in the crypto futures market surpassing $1.1 billion, as traders reacted to signals from Federal Reserve Chair Jerome Powell regarding interest rates and an uninspiring meeting between President Donald Trump and Chinese leader Xi Jinping.
Market Sell-Off Details
The leading digital asset, Bitcoin, dropped below $108,000, trading approximately 4% lower over a 24-hour period. This decline places Bitcoin nearly 15% below its recent all-time high of $126,080, which it achieved at the start of October, a period optimistically dubbed “Uptober” by market observers.
Ethereum, the second-largest cryptocurrency by market capitalization, also saw a 5% slide in the same 24-hour window, with its price settling just over $3,782. Other top altcoins, including Solana, XRP, and Dogecoin, were down by around 6%, with smaller altcoins facing even steeper losses.
The market volatility led to widespread liquidations in the crypto futures market, totaling over $1.1 billion. The vast majority of these liquidations were from positions betting on rising prices for Bitcoin and Ethereum, accounting for nearly $500 million and over $250 million, respectively.
Macroeconomic and Geopolitical Factors
The sell-off was primarily triggered by two key macroeconomic and geopolitical developments. Federal Reserve Chair Jerome Powell indicated on Wednesday that further interest rate cuts this year are not a “foregone conclusion.” Markets, including crypto and stocks, typically favor low-interest rate environments, and the Fed had implemented rate cuts in its two preceding meetings.
Adding to market uncertainty was the outcome of President Trump’s highly anticipated meeting with Chinese leader Xi Jinping. Despite President Trump describing the meeting as “truly great” and “amazing” and agreeing to a 10% tariff reduction on China, markets appeared unimpressed, as U.S. stock indices also traded lower.
Expert Commentary
Strahinja Savic, head of data and analytics at FRNT Financial, commented on the market’s reaction. “The market was expecting a green light to go risk-on. Instead, Powell said that further cuts are not a ‘foregone conclusion’ and the Xi-Trump meeting did not produce any concrete results or certainty,” Savic told the publication. He noted that shorter-term investors were likely adjusting their positions after not receiving the expected positive signals.
Greg Magadini, Director of Derivatives at Amberdata, echoed this sentiment, suggesting that markets were broadly positioned for a positive outcome from both the Fed meeting and the Trump-Xi talks. He concluded that without a clear new catalyst for upward movement, a sell-off was a logical market response.
Market Outlook
Historically, President Trump’s trade rhetoric and tariff announcements have frequently caused instability in markets, impacting “risk-on” assets like Bitcoin and tech stocks. The current market reaction suggests that even a softening of tariffs, as seen after the recent meeting, may not be enough to immediately restore investor confidence without more definitive positive outcomes.
