Bitcoin Drops as Polymarket Revises Federal Interest Rate Cut Forecasts
This week, Bitcoin faced a decline and set up an unstable pattern as traders recalibrated their outlook on interest rate cuts from the Federal Reserve.
Summary
- Bitcoin’s value dropped following the release of strong producer price index figures.
- Polymarket’s predictions for Federal Reserve rate cuts have lessened in recent days.
- Technical analysis suggests potential further declines before any recovery.
As of Saturday, August 16, Bitcoin (BTC) decreased from its peak of $124,420 to $117,760. Its market cap currently stands at $2.34 trillion, down from its high of $2.47 trillion. This decline aligns with a decrease in the likelihood of Federal Reserve rate cuts amid rising concerns over stagflation.
Fed Chair Jerome Powell, opposing President Trump’s views, believes that a strong labor market should come with price stability. Currently, this balance appears to be absent in the U.S., where tariffs enacted on August 7 are causing increased costs as companies transfer import expenses to consumers.
Bitcoin affected by reduced Fed cut expectations
The BTC price climbed to a record high of $124,420 on August 14 after a positive consumer inflation report from the Bureau of Labor Statistics. Although the core Consumer Price Index rose to 3.1%, the overall rate stabilized at 2.7%.
However, the sentiment shifted the next day when producer price index data spiked to 3.6% in July, raising doubts about whether the Fed would go ahead with anticipated interest rate cuts in September.
An inflation expectations report released on Friday brought further concerns. The University of Michigan’s survey revealed that inflation expectations for 2026 increased to 4.9%, with 3.9% anticipated for the next five to ten years.
These figures, coupled with a disappointing nonfarm payrolls report from earlier in the month, hint that the U.S. economy might be sliding into stagflation, marked by elevated inflation and stagnant growth.
As a result, Bitcoin’s price consolidated downward as traders tempered their predictions for Federal Reserve interest rate cuts. Data from Polymarket shows that the likelihood of a September cut, while still strong, has dropped from 80% to 70% as of today.
Historically, Bitcoin tends to thrive when the Federal Reserve is cutting rates or when expectations for such cuts rise.
Moreover, Bitcoin’s price faced additional pressure after Austan Goolsbee, a member of the FOMC, warned that the bank needed more information to decide on its future actions, as the ramifications of the new tariffs would take time to manifest.
Technical Analysis of BTC Price
The daily chart indicates that Bitcoin’s price has been under pressure lately. This commenced with the establishment of a notably bearish double-top pattern at $123,200, with a neckline positioned at $112,000.
Additionally, a bearish divergence pattern has emerged, as evidenced by the Relative Strength Index and MACD indicators, both showing lower lows and lower highs.
Consequently, it’s probable that BTC’s value will continue to fall in the coming days before a rebound occurs. A confirmation of further increases would require a rise above the all-time high of $124,420.