Bitcoin plunged below the $60,000 mark ahead of the widely anticipated interest rate cut by the Federal Reserve later this week. The upcoming policy adjustment by the Fed has created nervousness in global markets. The first rate cut in over four years in the US signals a more accommodative financial environment, which is typically a positive backdrop for riskier assets like cryptocurrencies. However, investors are uncertain about the magnitude of the rate cut on Wednesday, and how the market will react to the latest projections by Fed officials (known as the dot plot) and the Fed Chair Powell’s statement.

“The rate cut is less important than the signals and the updated dot plot from the press conference,” said Sean McNulty, head of trading at liquidity provider Arbelos Markets. “If the guidance and the press conference are significantly dovish, we expect Bitcoin to go up.” Bitcoin prices climbed 10% in the seven days through Sunday, marking its biggest weekly gain since July, likely reflecting rising bets on a 50-basis point rate cut by the Fed. Caroline Mauron, co-founder of digital asset derivatives trading liquidity provider Orbit Markets, said the “pricing weight of the Fed meeting is significantly higher than what we’ve seen recently” in the Bitcoin options market.

It can be argued that the monetary policy outlook has become the primary driver of Bitcoin’s short-term moves, overshadowing (at least for now) the impact of the US presidential election. (Bloomberg)