Bitcoin Plunges After Hitting All-Time High Amid Rising Fed Rate Cut Expectations, Stocks Mixed

Bitcoin Plunges After Hitting All-Time High Amid Rising Fed Rate Cut Expectations, Stocks MixedU.S

Bitcoin Plunges After Hitting All-Time High Amid Rising Fed Rate Cut Expectations, Stocks Mixed

U.S. stocks were mixed on Wednesday, November 13, with the Dow Jones Industrial Average rising 0.11%, the Nasdaq Composite falling 0.26%, and the S&P 500 advancing 0.02%. The release of the U.S. October CPI data, which met expectations with a 2.6% year-over-year increase and a 0.2% month-over-month rise, intensified market expectations for a Fed rate cut in December. The dollar index crossed 106, reaching its highest level in two years, driven by these expectations.

Meanwhile, Bitcoin, after surging past the $93,000 mark to set a new all-time high, plummeted by nearly $5,000. Over 250,000 users across the entire network liquidated their positions in the last 24 hours.

CPI Data Meets Expectations, Reinforcing Fed Rate Cut Anticipations

The U.S. October CPI data showed inflation holding steady at 2.6%, in line with market expectations. Following the data release, several Fed officials delivered speeches, offering varying perspectives on the trajectory of inflation and future monetary policy.

Federal Reserve official Neel Kashkari stated that inflation is moving in the right direction, and there are currently no evident signs of upward inflationary risks. However, he also noted that the larger risk lies in the possibility of the economy stagnating. Fed's Logan, on the other hand, believes that further rate cuts are likely, but the level of neutrality remains uncertain. While the labor market is gradually cooling down, it hasn't weakened substantially. Fed official Michael S. Barr expressed his anticipation of inflation converging towards 2% within 12 to 24 months. He also emphasized that monetary policy is currently restrictive, but the overall financial environment remains supportive of economic activity.

With the CPI data aligning with expectations, traders have increased their bets on a Fed rate cut in December. Multiple major institutions have indicated their belief in a December rate reduction. Stephen Juneau and Megan Swiber from Bank of America stated: "For the Fed, this is a data-dependent meeting. Inflation is moving sideways on a year-over-year basis, but there was nothing in today's report that would make the Fed panic. Therefore, a 25-basis-point rate cut in December remains our base case forecast." Citigroup economists, however, maintain their stance that a 50-basis-point rate cut is in store for December.

Bitcoin Surges, Then Retrenches, Reflecting Market Volatility

Following its historic high, Bitcoin experienced a significant pullback, dipping below the $90,000 mark at one point. Analysts attribute this heightened volatility in Bitcoin prices to several factors:

• Strengthening Fed Rate Cut Expectations: Rising expectations for a Fed rate cut are prompting investors to shift some capital from risk assets to other investments, exerting pressure on Bitcoin prices.

• Market Sentiment Fluctuations: The Bitcoin market has always been known for its volatility, with its price susceptible to market sentiment changes. The recent surge in Bitcoin prices might have led investors to lock in profits at the high levels, resulting in price retracement.

• Technical Correction: After surpassing its all-time high, Bitcoin might be undergoing a technical correction, causing prices to pull back to support levels.

Other Market Performances

Beyond Bitcoin and Fed policy, other markets exhibited various changes:

• Dollar Index: The dollar index rose 0.43% to close at 106.479, reaching its highest point since mid-April.

• International Oil Prices: International oil prices climbed, with the New York Mercantile Exchange's crude oil futures contract for December delivery gaining 0.46% to settle at $68.43 per barrel. London's Brent crude oil futures contract for January 2025 delivery advanced 0.54% to close at $72.28 per barrel.

• Tech Stocks: Prominent tech stocks displayed mixed performances. Intel, Amazon, and Netflix experienced significant gains, while Nvidia, Alphabet A, and Qualcomm saw substantial losses. AMD announced layoffs of approximately 4%, affecting around 1,000 employees, leading to a 3.01% decline in its stock price.

• Financial Stocks: Financial stocks showed a mix of gains and losses. AIG and U.S. Bancorp registered notable gains, while UBS and Mastercard experienced declines.

• Chinese ADRs: Popular Chinese ADRs mostly fell, with the Nasdaq Golden Dragon China Index dropping 1.09%. New Oriental and NetEase witnessed significant losses.

In summary, the major U.S. indices traded in a mixed fashion, while Bitcoin experienced a significant plunge following its historical peak, reflecting elevated market sentiment volatility. Strengthened Fed rate cut expectations drove the dollar index to a sustained rise, and international oil prices moved higher. Tech stocks traded in a mixed range, with AMD announcing layoffs and experiencing a drop in its stock price. Popular Chinese ADRs largely declined.