The crypto market crashed even as the stock market staged a strong comeback. The Bitcoin price dropped by over 2.65%, falling from a high of $105,000 on Monday to below $102,000.
Other popular cryptocurrencies, such as Pepe Coin (PEPE), Shiba Inu (SHIB), and Cardano (ADA), also pulled back by more than 2%. As a result, the market capitalisation of all cryptocurrencies dropped to $3.28 trillion.
These cryptocurrencies declined even as US equities surged. The Dow Jones, Nasdaq 100, and S&P 500 indices rose by over 3%, marking their best day in weeks.
Bitcoin, Shiba Inu, Cardano, and Pepe Coin also declined as the US Dollar Index (DXY) surged to $101.7, up from a year-to-date low of $97. Gold surged to a record high in April but has also reversed.
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Fed Forecast Crashes BTC, Cardano, Shiba Inu, Pepe Coin
One potential reason for this price action was a major Federal Reserve warning that sent shockwaves in the crypto industry. In an X post, Jim Bianco, a popular economist, warned that the odds of the Federal Reserve slashing interest rates soon were fading quickly.
He noted that the odds of a June interest rate cut dropped to 8% and in July to 35%. Most notably, he noted that no Fed cut was priced in until September, and even then, the odds were falling fast.
The same view is happening in Polymarket, where market participants expect just two interest rate cuts this year, down from 3 last week. A September rate cut has a 52% chance, while a 0.25% cut has a 41% chance.
The likelihood of a Federal Reserve rate cut decreased even after the United States and China reached an agreement to reduce tariffs significantly. The US reduced tariffs from 145% to 30%, while China lowered its tariffs from 125% to 10%.
Consequently, the probability of a rate cut decreased because analysts now anticipate the US will avoid a recession and expect inflation to remain higher. On Tuesday, the likelihood of a recession as predicted on Polymarket decreased significantly, accompanied by high trading volume.
The next key catalyst for cryptocurrencies like Bitcoin, Cardano, Shiba Inu, and Pepe Coin will come out on Tuesday when the United States publishes its consumer inflation data, which will shed more light on the immediate impact of tariffs on inflation.
The data comes a week after the Federal Reserve left interest rates unchanged and maintained a wait-and-see approach, which Donald Trump criticized.
Bitcoin and altcoins typically perform well when the Federal Reserve is cutting interest rates or signals its intention to begin lowering rates.
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