Bitcoin and Ether suffered losses amid a strengthening U.S. dollar, following a shift in market sentiment regarding Federal Reserve interest-rate cuts. Both cryptocurrencies, despite minor recoveries, remained down over the past 24 hours as traders awaited a key inflation report that could steer monetary policy expectations and impact market volatility.

Bitcoin and Ether experienced losses as the strengthening U.S. dollar exerted pressure on the cryptocurrency market ahead of a crucial inflation report. Although both cryptocurrencies showed minor recoveries from their overnight lows, their overall performance remained negative over the past 24 hours. Market analysts suggest that the rallying dollar is contributing to the downturn in crypto prices. Specifically, Bitcoin (BTC) hovered around $61,000, slightly above the previous low of $60,400 yet still reflecting a decline of over 1.5% within the last day. Ether (ETH) similarly traded down 1.9% at $2,395. Other significant cryptocurrencies, such as Binance Coin (BNB) and Solana (SOL), also encountered decreases of 1%, while XRP fell by 0.6%. The strength of the dollar was evident in the dollar index (DXY), which rose to 102.97, marking its highest point since mid-August and reflecting a cumulative rise of 2.7% from the low of 100.18 recorded on September 30. Market speculation regarding Federal Reserve interest-rate cuts shifted dramatically; as reflected in the CME’s FedWatch tool, traders are now estimating an 85% probability for a 25 basis point cut at the upcoming November 7 meeting, a notable increase from the 65% predicted the prior week. The release of the U.S. nonfarm jobs report has led traders to reconsider their forecasts for future rate modifications amid a narrative of “U.S. exceptionalism.” The minutes from September’s Fed meeting revealed a divide among policymakers on the aggressiveness of potential rate cuts. Alex Kuptsikevich, a senior market analyst at FxPro, noted that “Crypto sentiment has moved back into the fear zone (39), reinforcing the contrast with 72 (greed) in equities,” highlighting the impact of the dollar’s appreciation and the rising attractiveness of bonds, which has diminished institutional interest in Bitcoin. Kuptsikevich further mentioned that the forthcoming inflation report from the U.S. could induce market volatility if the figures diverge from expectations. The anticipated consumer price index (CPI) data is projected to show a month-on-month increase of 0.1% and an annual rise of 2.3%, following prior readings of 0.2% and 2.5%. Core CPI, which excludes food and energy costs, is expected to show a 0.2% month-on-month increase and a 3.2% year-on-year increase. Should the CPI data be hotter than expected, it might invigorate discussions against continuing rate cuts, further stimulating DXY’s upward movement and fostering risk aversion in the crypto markets. Nevertheless, analysts at ING have stated that the CPI may not significantly alter market positions due to the Fed’s current emphasis being on labor market indicators.

In the context of financial markets, the interplay between the U.S. dollar and cryptocurrencies like Bitcoin and Ether is significant. The dollar’s strength often correlates with shifts in investor sentiment, particularly concerning speculative assets like cryptocurrencies. As inflation reports influence the Federal Reserve’s monetary policy decisions, any unexpected results can lead to heightened volatility in both traditional and digital asset markets. The anticipation surrounding U.S. economic data, including employment figures and consumer price indexes, shapes trader expectations and market dynamics, highlighting the interconnectedness of various asset classes in response to economic indicators.

In summary, Bitcoin and Ether faced declines as the U.S. dollar strengthened ahead of an important inflation report, reflecting broader market anxieties regarding Federal Reserve interest-rate decisions. Despite minor recoveries from previous lows, both cryptocurrencies experienced losses. The upcoming inflation data will be critical in shaping market expectations, and analysts foresee potential volatility based on the outcomes, particularly in light of shifting perceptions regarding interest rates and economic fundamentals.

Original Source: www.coindesk.com

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