Original | Odaily Planet Daily (@OdailyChina)

Author | Fu Ruo (@vincent31515173)

Last night, the cryptocurrency market began to show a downward trend. OKX market data shows that BTC briefly dropped below 69,000 USDT, currently reported at 69,383.9 USDT, with a 24H decline of 5.18%.

Under the influence of BTC, altcoins led by Ethereum also experienced a certain degree of correction. As of the time of writing, ETH is reported at 2,505 USDT, with a 24H decline of 5.69%; SOL is reported at 167.88 USDT, with a 24H decline of 4.82%; BNB is reported at 576.5 USDT, with a 24H decline of 3.13%; OP is reported at 1.604 USDT, with a 24H decline of 5.92%.

Affected by the overall market downturn, the total market capitalization of cryptocurrencies is facing a certain shrinkage. CoinGecko data shows that the current total market capitalization of cryptocurrencies has dropped to 2.43 trillion US dollars, with a 24H decline of 5.7%. However, the trading enthusiasm of cryptocurrency users has not diminished, with today's fear and greed index at 75, and the weekly level still in greed. Except for today's 2-point drop in the index, the index has been rising at other times.

In terms of derivatives trading, Coinglass data shows that in the past 24 hours, the entire network has seen liquidations of 275 million US dollars, most of which were long position liquidations, amounting to 246 million US dollars. In terms of cryptocurrencies, BTC liquidations amounted to 86.5734 million US dollars, and ETH liquidations amounted to 44.8059 million US dollars.

Just two days ago, BTC rose to 73,650 USDT before retreating, only about 130 USDT away from this year's previous high of 73,787.1 USDT in March. At that time, institutions were all bullish, and the options market was mainly selling call options. Will the new high come, and when?

Reasons for the decline: Uncertainty about future Fed rate cuts

The apparent reason for the poor market performance is that Bitcoin failed to break through its previous high on October 30, leading to a subsequent decline. Market sentiment regarding the uncertainty of Bitcoin's future price has increased, causing investor sentiment to become cautious, which in turn intensified the market's selling pressure.

The underlying reason may be the uncertainty surrounding the Fed's rate cut expectations.

The recent decline in the cryptocurrency market is closely related to changes in expectations for future Fed rate cuts. Although the CME "Fed Watch" predicts a 96.1% probability of a 25 basis point rate cut in November, this expectation faces many uncertainties.

Among them, the rebound in U.S. inflation is an important factor affecting Fed policy. Data shows that the core PCE price index rose by 0.3% month-on-month in September, with a year-on-year rate of 2.7%. This data exceeds the Fed's target of 2%, indicating that inflationary pressures still exist, which may lead the Fed to pause rate cuts in future policy meetings.

• Economic performance: Although the economy is relatively strong and consumption remains robust, the high core PCE suggests that the Fed will be more cautious when cutting rates. Peter Cardillo, chief market economist at Spartan Capital Securities, stated that the signals of rising inflation have been confirmed in the latest data, which may lead the Fed to pause rate cuts.

• External views: Larry Fink, CEO of BlackRock, and Anthony Scaramucci, founder of SkyBridge Capital, both stated that the Fed may not cut rates as quickly as the market expects, predicting that another 25 basis point cut may not occur until 2025.

In summary, the uncertainty surrounding the Fed's rate cut expectations, particularly the pressure of rising inflation, is the main reason for the recent decline in the cryptocurrency market. The fluctuations in market sentiment and interpretations of the Fed's future policies will continue to affect the trends of crypto assets.

What's next? The upcoming U.S. election may determine the future direction of the cryptocurrency market

The U.S. election is approaching, and its outcome may have a profound impact on the cryptocurrency market. JPMorgan analyst Nikolaos Panigirtzoglou pointed out that a victory for Trump would further enhance Bitcoin's momentum, especially among retail investors, creating a so-called "devaluation trade" phenomenon. Retail investors are increasingly actively purchasing Bitcoin and gold ETFs, and even showing strong impulses in investments in meme and AI tokens, which have relatively strong market performance.

Matt Hougan, chief investment officer of Bitwise, believes that regardless of the election outcome, the regulatory environment for Bitcoin is improving, which is positive news for the cryptocurrency market. The entry and adoption rates of institutional investors, as well as the continuous inflow of ETF funds, are all good signals for the market. In the short term, the cryptocurrency market is more inclined towards a Trump victory, which will have a greater impact on Ethereum and other altcoins.

Data from Matrixport shows that when Trump was first elected in 2016, the price of Bitcoin was about 700 US dollars and surged significantly in the first year of his presidency. Although a single data point is insufficient to establish a trend, market optimism remains high. If Trump is re-elected, it is expected that he may relax regulations on the cryptocurrency market, further driving up Bitcoin.

Current market dynamics show that the prediction market Polymarket estimates Trump's victory probability at 66.5%, which may be one of the largest margins in history. Meanwhile, the demand for Bitcoin continues to grow, with several ETFs recently seeing increased inflows.

Overall, the upcoming U.S. election is the most direct factor influencing the current cryptocurrency market situation, and the market is more willing to see Trump win, thus fulfilling his promises to cryptocurrency voters.

Additionally, CZ, who has not been seen for a long time, also injected confidence into the market from a historical perspective last night, stating: "Historically, Bitcoin has gone through a clear four-year cycle, with past bull markets occurring in 2013 and 2017, while 2012 and 2016 were 'recovery years.' Based on this pattern, the market generally believes that 2024 will also be a 'recovery year.' Although the specific situation in the future remains unclear, the cryptocurrency industry is still considered optimistic in the long run." In light of this, the future cryptocurrency market remains full of hope.

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