The probability of an interest rate cut at the upcoming December Federal Open Market Committee (FOMC) meeting has significantly decreased, now standing at approximately 33%. This decline coincides with a period of "extreme fear" gripping the cryptocurrency market, marked by a notable dip in the price of Bitcoin (BTC) below $89,000.
Earlier in November, investors had placed the odds of a December rate cut at around 67%. However, this figure dropped below 50% on Thursday, according to data compiled by the Chicago Mercantile Exchange (CME).
Prediction markets, including Kalshi and Polymarket, also reflect a growing hesitancy. Traders on these platforms forecast the odds of a December rate cut at approximately 70% and 67%, respectively. While these figures are higher than CME's, the general sentiment among traders indicates increased caution due to persistent concerns about inflation, as noted by The Kobeissi Letter.
The sharp decline in the likelihood of a December rate cut, coupled with falling cryptocurrency prices, has triggered a sense of panic within the market. Some analysts are now suggesting that this downturn could be indicative of the onset of an extended crypto bear market, characterized by further declines in asset prices.
BTC Price Drops Below $89,000 as Market Sentiment Nears Yearly Low
The price of Bitcoin (BTC) once again fell below the $90,000 mark on Wednesday, failing to maintain its position above a critical support level. For the past six consecutive days, BTC has been trading significantly below its 365-day moving average, a key indicator of support.
Adding to the bearish outlook, Bitcoin's 50-day exponential moving average (EMA) has crossed below its 200-day EMA. This technical signal, commonly referred to as a "death cross," typically suggests potential for further downward price movement for BTC.
In light of these developments, some analysts are now forecasting a potential drop to $75,000, suggesting this level could act as a bottom before a rebound occurs by the end of 2025. Others are contemplating whether the cycle's peak has already been reached.
Market analyst Benjamin Cowen shared his perspective on Sunday, stating, "The time for Bitcoin to bounce, if the cycle is not over, would start within the next week."
Cowen further elaborated, "If no bounce occurs within 1 week, probably another dump before a larger rally back to the 200-day simple moving average (SMA), which would then mark a macro lower high."
These forecasts are being made amidst a significant decline in cryptocurrency investor sentiment. The "Crypto Fear & Greed Index," which measures investor sentiment, currently stands at 16, indicating a state of "extreme fear" among market participants.
According to CoinMarketCap, this level of investor sentiment is just one point above the yearly low, underscoring the prevailing caution in the crypto market.