Bitcoin and ether slide as equities sell-off despite rising rate-cut expectations

Bitcoin, ether, and other major altcoins fell further on Friday alongside equity indices, despite indicators boosting the odds that the U.S. Federal Reserve could begin a rate cut cycle in September.

The bitcoin price traded lower over the past 24 hours, down 3% to change hands for $57,189 at 7:51 a.m. ET, according to The Block's Price Page. Major altcoins such as ether and Solana also fell 2% and 5%, respectively, in the same period. The downturn in the cryptocurrency market was mirrored by equity indices, which were mostly in the red at the end of trading on Thursday. The Nasdaq Composite and the S&P 500 were down 1.95% and 0.88%, respectively, at the end of trading on Thursday.

This response contradicts the conventional narrative that equities should react positively to rate-cut signals. 

Cooler-than-expected inflation print fails to reverse downtrend

This week, market participants were given two positive indicators that support the cause for the commencement of a rate-cutting cycle, a cooler-than-expected Consumer Price Index CPI reading on Thursday and U.S. Federal Chair Jerome Powell's testimony before Congress, where he stated that recent economic data shows "modest further progress" on inflation.

The latest CPI data released on Thursday supported Powell’s comments, with June inflation retreating to -0.1%, against an expectation of +0.1%. This brings year-over-year inflation down to 3.0%, paving the way for Powell to begin easing restrictive policy.

According to the Chicago Mercantile Exchange FedWatch tool, interest rate traders have increased the chances of a rate cut happening in September from 68.1% on Thursday to 88.1% today.

Risk assets sell-off amid rising Fed rate cut expectations

The conventional narrative on macro drivers and risk-asset behaviors seems to have collapsed in the past 24 hours, as the increased odds of a Fed rate cut in September failed to trigger a rally in risk assets.

"Despite the soft June CPI release, the Nasdaq is down and bitcoin is flat, while Russell 2000 and real estate stocks have rallied. The media explains this as a rotation into laggards from leaders, but whether this truly represents a new emerging trend will be proven in the coming weeks," analysts from Presto Research said in a Friday market report.

Despite bitcoin's further downtrend, crypto investors could see market volatility from former U.S. President Donald Trump's appearance at a Bitcoin Conference in Nashville, Tennessee.