Digital assets began stabilizing on Sunday through Monday morning as markets rebounded from intense selling pressure last week.
Bitcoin (BTC) traded 0.1% higher at $114,299.81 at 11:24 UTC Monday, having plunged to its lowest level in three-and-a-half weeks the day before. Ether (ETH) and XRP posted stronger gains, advancing 1.6% and 1.2% respectively.
Trade tensions
Markets dropped on Friday after the US introduced new trade-related threats on certain countries and as the latest deadline to make a tariff deal passed. Disappointment rippled around financial markets when the US also revised down jobs data for the months of May and June and posted below-forecast figures for July. President Trump promptly fired the chief of the Bureau of Labor Statistics.
These headwinds sent global equities lower while the dollar slid against other major currencies, according to the DXY Dollar Index. Crypto assets were also badly hit with Bitcoin plunging below $112,000 as losses continued into the first part of the weekend.
Rates held steady
Earlier in the week, the US Federal Reserve maintained interest rates at current levels, as widely expected, offering little indication whether it would modify its stance at the next meeting in September. That immediately triggered a sharp drop in Bitcoin during the first hour after the Fed decision was released, although it had left traders pondering until the next day before the selling really began.
Investors subsequently pulled more than $900 million from Bitcoin ETFs (exchange-traded funds) on Thursday and Friday, compounding the downward pressure that followed the Fed decision.
The convergence of the Fed’s neutral stance and weak employment data may help explain the recent stabilization. Although the central bank remained noncommittal about a potential rate cut in September, deteriorating job market conditions could support the case for monetary easing – namely, a cut in interest rates. Any signal that suggests increased likelihood of reduced borrowing costs may strengthen cryptocurrencies and other risk assets going forward.
