The cryptocurrency market experienced a period of stagnation during the European morning, as investors reevaluated the likelihood of significant interest rate cuts by the Federal Reserve. This cautious sentiment led to a strengthening of the U.S. dollar ahead of an important inflation report.
Bitcoin (BTC) and Ether (ETH), the two largest cryptocurrencies by market value, saw a slight recovery from overnight lows but remained in the red on a 24-hour basis. BTC was trading near $61,000, up slightly from its low of $60,400, while ETH was down 1.9% at $2,395. Other major alternative cryptocurrencies such as BNB and SOL were also trading lower, with XRP down 0.6%.
The dollar index (DXY), which measures the dollar against major fiat currencies, reached 102.97, its highest level since August 16th. This upward movement in the dollar index reflected a cumulative gain of 2.7% since its low on September 30th.
Traders were increasingly pricing in a 25 basis point interest rate cut by the Fed at its November 7 meeting, with an 85% probability according to the CME’s FedWatch tool. This shift in expectations followed a strong nonfarm jobs report on Friday, which prompted a reevaluation of the need for aggressive rate cuts.
The upcoming U.S. inflation report, expected to be released at 12:30 UTC, could potentially lead to market volatility if it deviates from expectations. A hotter-than-expected Consumer Price Index (CPI) print could strengthen calls to halt rate cuts, further boosting the dollar’s momentum and potentially causing risk aversion among investors.
Overall, the sentiment in the crypto market has shifted to a more cautious tone, with the fear index standing at 39, contrasting with the greed index of 72 in equities. The appreciation of the dollar and the attractiveness of bonds have reduced institutional interest in bitcoin, according to analyst Alex Kuptsikevich.
As investors await the U.S. inflation report, the market remains uncertain about the future direction of interest rates and its impact on cryptocurrencies. The outcome of the report will likely influence investor sentiment and market dynamics in the coming days.