The crypto market took a hit on the 9th of October as Bitcoin [BTC] led the downward trend, experiencing a 2.45% drop and reaching a critical support level.
The largest digital asset globally lost $1.5K, falling from $62.5K to a low of $60.3K, following the publication of the FOMC Minutes from the September meeting.
Effect of FOMC Minutes on BTC and Crypto
Among the major cryptocurrencies, Binance [BNB] witnessed the most significant retracement, dropping by 2.65% at the time of reporting.
XRP experienced a slight decline, while Solana [SOL] and Ethereum [ETH] saw decreases of 2.4% and 1.8% respectively. Meanwhile, Uniswap [UNI] emerged as a notable gainer for the day.
The downturn in the market was attributed to the FOMC Minutes, which tempered expectations for a further 50 bps (basis points) rate cut by the Federal Reserve in November.
Most notably, the minutes revealed that a majority of members had supported the aggressive 50 bps rate cuts in September due to concerns about the weak U.S. labor market conditions at that time.
However, recent data has shown significant improvement in the U.S. labor market, with 250K jobs added in September, surpassing analysts’ predictions.
This positive development regarding the labor market removed a key factor that supported the case for an aggressive rate cut.
Subsequently, analysts anticipated that the Federal Reserve might opt for a 25 bps rate cut or maintain the current rates unchanged.
As of now, traders were pricing in an 80% probability of a 25 bps rate cut and a 20% likelihood of no change in rates.
The outlook could shift based on the September inflation data (CPI). Bitcoin has exhibited heightened sensitivity to rate cut expectations by the Federal Reserve and movements in U.S. equities, a pattern commonly associated with ‘risk-on’ assets.
Interestingly, unlike the crypto markets, U.S. equities did not decline following the release of the FOMC Minutes and closed positively, while Bitcoin faced increased selling pressure.
According to JA Maartun from CryptoQuant, the drop in BTC could reverse if U.S. investors reduced the selling pressure.
“Forecast: Bitcoin is set for a substantial increase once the selling pressure from Coinbase subsides.”
On the price charts, Bitcoin hovered near a crucial support level around $60K. Despite this support preventing a further decline in early October, its sustainability after the release of the U.S. CPI data remained uncertain.
If the $60K support remains intact, a recovery towards the 200-day Moving Average (MA) of $63.5K could be possible.
However, a breach below this support level following the CPI release might lead Bitcoin towards the next support at $58K.