Bitcoin Plunges Below $54,000 as Fed Hints at Rate Cuts, ETF Outflows Weigh Down

Bitcoin Plunges Below $54,000 as Fed Hints at Rate Cuts, ETF Outflows Weigh DownBitcoin prices have plunged again, falling over 4% and breaking below $54,000. The second-largest cryptocurrency, Ethereum, experienced an even steeper decline, exceeding 6%

Bitcoin Plunges Below $54,000 as Fed Hints at Rate Cuts, ETF Outflows Weigh Down

Bitcoin prices have plunged again, falling over 4% and breaking below $54,000. The second-largest cryptocurrency, Ethereum, experienced an even steeper decline, exceeding 6%. Within the past 24 hours, the cryptocurrency market witnessed more than 86,000 liquidations. The latest downturn in Bitcoin prices is attributed to a double whammy of disappointing US labor market data and investor outflows from Bitcoin ETFs.

The US August non-farm payroll data released on Friday showed that job creation fell short of expectations, while previous months' figures were revised downwards. While the unemployment rate dipped, labor participation decreased. These figures suggest a cooling US labor market, paving the way for a potential interest rate cut by the Federal Reserve later this month.

Following the release of the employment report, Federal Reserve officials hinted at potential rate cuts in the near future. Fed Governor Christopher Waller stated that the labor market continues to soften but hasnt deteriorated, a crucial factor in the Feds upcoming decisions. While Waller didnt explicitly mention the size of the rate cut, he implied a preference for a 25 basis point reduction. New York Federal Reserve President John Williams echoed Federal Reserve Chair Jerome Powells remarks from last months Jackson Hole symposium, suggesting that its time to ease monetary policy but refrained from providing specifics on the rate cut magnitude.

The Feds loose monetary policy is generally considered favorable for speculative assets like cryptocurrencies. However, the Fed's hints at rate cuts haven't brought a boost to Bitcoin. In fact, investors are pulling funds from Bitcoin ETFs, becoming the final straw that broke the camels back for Bitcoin prices.

According to Sosovalue, 12 spot Bitcoin exchange-traded funds (ETFs), including iShares Bitcoin Trust (IBIT) by BlackRock and Fidelity Bitcoin ETF (FBTC) by Fidelity, have seen net outflows for five consecutive trading days, totaling over $765 million in outflows over the past five days. This comes after a period of eight consecutive days of net inflows, totaling $753 million. The past five days outflows have surpassed the previous sustained inflow.

Its noteworthy that on September 3rd, the 12 ETFs experienced a combined net outflow of $287.8 million, the highest single-day outflow in the past four months. Fidelity's FBTC led the outflow with $162.3 million. Grayscale's GBTC saw $50.4 million in outflows, Bitwise's BITB and Cathie Wood's ARK Next Generation Internet ETF (ARKB) lost $25 million and $33.6 million, respectively.

Earlier this year, Bitcoin's price surge was attributed to inflows into US spot Bitcoin ETFs, fueling a bull market. However, with investors withdrawing funds from Bitcoin ETFs, this upward trend has failed to sustain itself.

Currently, Bitcoin prices are experiencing a sustained decline, and the market outlook appears bleak. Investors need to closely monitor the Fed's interest rate decisions and the flow of funds into Bitcoin ETFs to gauge the future trajectory of Bitcoin prices.

Please note that the content above is for informational purposes only and does not constitute investment advice. Investing involves risks, and you should proceed with caution.