Markets Brace for Rate Cuts as Bitcoin Eyes a Short-Term Bounce
The crypto market is showing early signs of stabilization after a turbulent week, with traders shifting their focus from geopolitical uncertainty to upcoming economic data and anticipated Federal Reserve rate cuts.
Rate Cuts on the Horizon
Markets are currently pricing in four 25 basis point rate cuts by the U.S. Federal Reserve in June, July, September, and December. Rate cuts are typically seen as bullish for risk assets, including cryptocurrencies, as they lower borrowing costs and reduce the attractiveness of traditional yield-bearing investments like bonds.
These expectations come as investors prepare for the release of key U.S. economic data, particularly the non-farm payroll report, which is set to be published Friday. This report, a leading indicator of job creation and wage trends, could play a pivotal role in shaping the Fed’s monetary policy decisions.
“Investors are bracing for signs of softness in the U.S. labor market,” Singapore-based QCP Capital said Friday in a Telegram broadcast. “A weaker-than-expected print would strengthen the case for additional rate cuts this year as the Fed looks to support a slowing economy.”
Tariff Tensions Spark Short-Term Sell-Off
Earlier this week, crypto markets were rocked by heightened volatility ahead of former President Donald Trump’s announcement of a 10% tariff on all imports. Major tokens like Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and XRP surged leading up to the speech but quickly reversed gains as global markets reacted to the news, erasing most of their earlier momentum.
On-chain data from CryptoQuant showed a notable uptick in exchange inflows ahead of the announcement, suggesting investors were preparing to sell. Bitcoin transfers hit 2,500 BTC in a single block, while ETH inflows peaked at 80,000 ETH per hour. XRP deposits into Binance surged to 130 million in one hour, up significantly from typical daily volumes.
The increased movement of assets onto exchanges, especially from large holders, indicates growing caution among traders. CryptoQuant also noted that long positions in BTC and ETH perpetual futures were being closed, signaling profit-taking and risk reduction amid mounting uncertainty.
Friday Recovery and Market Sentiment
Despite the midweek volatility, prices began recovering by Friday morning. BTC held steady above $83,100, ETH reclaimed the $1,800 level, and XRP, SOL, and ADA posted gains of over 2%.
QCP Capital highlighted ongoing short-term volatility, noting that more investors are seeking downside protection. However, they also emphasized a potential shift in sentiment:
“With positioning now light and risk assets largely oversold, the stage may be set for a near-term bounce,” the firm said.
Historically, Bitcoin and other cryptocurrencies have responded favorably to rate cuts, which often weaken the U.S. dollar and boost the appeal of decentralized assets as alternative stores of value.
With market participants now watching closely for macroeconomic signals and dovish moves from the Fed, the next few weeks could be pivotal for crypto’s next directional move.
