Bitcoin Drops 2.2% as Fed Rate Cut Hopes Fade

Bitcoin and most altcoins experienced a decline on Friday, July 4, as investors opted to secure profits, trade tensions resurfaced, and expectations for a Federal Reserve interest rate cut diminished. Bitcoin (BTC) fell to $107,800, marking a significant retreat from the week’s high of $110,200. Among the altcoins, SPX6900 (SPX), Ethena (ENA), Dogwifhat (WIF), and Pepe (PEPE) led the losses.

The decline in Bitcoin and altcoins can be attributed to the recent US nonfarm payrolls jobs data and its implications for the Federal Reserve. According to a report released on Thursday by the Bureau of Labor Statistics, the economy added 147,000 jobs in June, while the unemployment rate dropped to 4.2%. These figures exceeded expectations, which had projected an addition of 100,000 jobs and an unemployment rate increase to 4.3%. The report also contrasted with the ADP report, which had indicated a loss of over 33,000 private-sector jobs.

The strong jobs data suggests that the Federal Reserve is unlikely to cut interest rates in July, contrary to hints from Jerome Powell earlier in the week. Bitcoin and other altcoins tend to perform well when there are hopes of interest rate cuts, as lower rates can make riskier assets more attractive.

The crypto market also faced downward pressure as the July 7 deadline for new tariffs approached. While agreements have been reached with several key trading partners, including China, Vietnam, and the UK, deals with Japan, South Korea, and the European Union remain unresolved. This uncertainty raises the risk of an extended trade war, which can negatively impact global markets, including cryptocurrencies.

Additionally, the U.S. Independence Day holiday contributed to a decline in trading activity, adding to the downward pressure on digital assets. The decline appears partly driven by profit-taking, as traders locked in gains from the recent rally. Several of the week’s best performers, including Pudgy Penguins, Bonk, Fartcoin, and Dogwifhat, were among Friday’s top laggards.

Despite the recent retreat, the ongoing decline could be temporary. Bitcoin has strong fundamentals, with ETF demand rising and supply on exchanges falling. It has also formed a cup-and-handle and a bullish flag pattern, pointing to a potential rebound in the near term. The overall market sentiment remains cautious, but the underlying strength of Bitcoin and other altcoins suggests that the current pullback may be short-lived.