By Gertrude Chavez-Dreyfuss and Samuel Indyk
NEW YORK/LONDON (Reuters) -Bitcoin dropped to its lowest level in six months on Friday, as a broad sell-off in risk assets deepened amid fading hopes that the Federal Reserve will cut U.S. interest rates at its upcoming policy meeting.
Selling in U.S. equities, however, eased slightly in the afternoon ahead of the weekend, but investors stayed on edge as they braced for a slew of economic data next week following the government’s reopening after a record 43-day shutdown.
“Bitcoin and crypto have generally enjoyed a positive correlation with good times in equities, so it has not become an asset of alternative value to hedge against fear in other sectors,” said Juan Perez, director of trading at Monex USA in Washington.
“If there is no enthusiasm toward risk-taking, it seems like that also translates into hesitation with bitcoin and the like.”
Risky assets overall have come under pressure in recent days as expectations of a rate cut from the Fed next month have shrunk as a growing number of policymakers signaled an inclination to hold off on easing.
Kansas City Fed President Jeffrey Schmid, a voter on the policy-setting Federal Open Market Committee, was the latest central bank official to express doubts about a December rate cut. He said on Friday his concerns about “too hot” inflation go well beyond the narrow effects of tariffs alone.
Markets now price in about a 40% chance of a December rate cut, down from about 90% earlier this month and just over 60% earlier this week.
In early afternoon trading, bitcoin, the world’s largest cryptocurrency, was last down 2.3% at $96,564, having earlier dropped to $95,885.33, its lowest since May 7.
Ether, the second-largest cryptocurrency, was last flat on the day at $3,175.22, after dropping to a 10-day low.
Dave Rosenberg, founder and president of Rosenberg Research, said bitcoin is in “official bear market terrain, having declined by more than 20% in barely more than a month.” He also pointed to huge redemptions at exchange-traded funds, totaling $870 million on Thursday alone.
Since peaking on October 7, the crypto market capitalization has fallen by more than $1 trillion, or 24%.
The backdrop for bitcoin remains bearish, analysts said.
Long-term bitcoin holders have accelerated profit-taking, according to crypto research firm Glassnode. Those long-term bitcoin holders have sold 815,000 bitcoin over the past 30 days, a record high since January 2024, according to CryptoQuant, another digital asset research firm.
(Reporting by Gertrude Chavez-Dreyfuss in New York and Samuel Indyk in London; Editing by Dhara Ranasinghe and Richard Chang)
