Bitcoin and altcoins could face more downside pressure after a leading trader warned that the U.S. Federal Reserve may be making a policy mistake.
Summary
- Bitcoin and altcoins risk a price crash as traders watch the Fed closely.
- A top trader warns the Fed should not cut interest rates in September.
- A delayed rate cut could impact Bitcoin, altcoins, and U.S. stocks.
Bitcoin and Altcoins Plunge
Bitcoin’s price dropped to $113,000 on August 19, its lowest point in over a week and down 8.6% from its yearly high. Altcoins like Ethereum, Solana, and Sui also fell sharply, signaling renewed market weakness.
One of the main reasons Bitcoin and altcoins had rallied earlier this year was growing expectations that the Federal Reserve would cut interest rates. According to Polymarket, the probability of a September cut has stayed above 71%, while the CME FedWatch tool places the odds at 85%.
The shift in sentiment began after weak U.S. jobs data showed that nonfarm payrolls rose by just 73,000 in July, with unemployment climbing to 4.2%. Inflation data followed, with the consumer price index (CPI) holding steady at 2.7% instead of the expected 2.8%. Meanwhile, the core producer price index rose to 3.6%, showing persistent inflation pressures.
Top Trader Warns Against Fed Cuts
Sven Henrich, a well-known trader, cautioned that the Fed could be making a mistake by cutting rates too soon. He highlighted rising core inflation at 3.1% in July, expecting it to climb further as tariff effects filter through the economy.
Henrich’s warning comes just days before Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium. Powell has repeatedly emphasized that the Fed will remain data-driven in its decisions.
The current U.S. economy shows signs of stagflation—a mix of slow growth and high inflation.
This puts the Fed in a difficult position: cut rates to boost growth but risk higher inflation, or keep rates elevated and risk tipping the economy into recession. Moody’s chief economist, Mark Zandi, also noted that some industries are already showing recession-like conditions.
Bitcoin and Altcoins Show Bearish Signals
From a technical perspective, Bitcoin’s weekly chart suggests further weakness. The price has formed a rising wedge pattern, which often signals a bearish breakout as the lines converge.
Additionally, momentum indicators such as the Relative Strength Index (RSI) and the MACD are trending downward, creating a bearish divergence. If Bitcoin breaks down from these patterns, analysts warn it could fall below $100,000, dragging altcoins lower as well.
Conclusion
With the Federal Reserve’s decision hanging in the balance, both Bitcoin and altcoins remain vulnerable. A delayed or canceled rate cut could weigh heavily on crypto markets and even extend into traditional stocks. Traders and investors are now watching inflation, jobs data, and Powell’s remarks for clues on the Fed’s next move.
