Bitcoin Drops 3% as Rate Cut Hopes Fade

Bitcoin (BTC) experienced a sell-off at the May 28 market open, as investors continued to adjust their expectations for US interest rate cuts. The price of BTC/USD dipped below $108,000, challenging multiday lows. This movement came as markets grew increasingly cautious ahead of the release of the minutes from the Federal Reserve’s May meeting.

The odds of a rate cut, which has been a significant tailwind for crypto and other risk assets, decreased before September. This shift in sentiment was reflected in the CME Group’s FedWatch Tool, which showed diminishing probabilities for a rate cut in the near term. Informal sentiment also deteriorated, with prediction services indicating fewer rate cuts in 2025 compared to earlier predictions.

Despite the potential for labor market weakness, which could prompt the Fed to bring forward rate cuts, crypto and risk assets lacked an overall bullish catalyst. Analysts noted that consumer sentiment over the labor market was showing signs of a forthcoming unemployment spike, which historically has been a leading indicator for unemployment. However, this did not translate into a significant bullish catalyst for Bitcoin or other risk assets.

BTC price action continued to drop, cutting through bid liquidity on its way down. This movement was noted by traders who warned that breaking through certain liquidity levels could trigger further losses. The price of BTC/USD has been rangebound since its $112,000 all-time highs, and macro analysis suggested little chance of a price breakout without a suitable catalyst. Volatility across most asset classes continued to drift lower, as markets entered a lull amid a dearth of meaningful news flow and macroeconomic data.

Overall, the mood among risk assets remained cautious, with markets appearing increasingly inured to negative developments. The news cycle continued to be relentless, but markets brushed off headlines that might once have sparked more significant reactions. This lack of volatility and the absence of a clear bullish catalyst contributed to the continued decline in Bitcoin’s price.