As global stock markets face a significant downturn, traders are speculating on the possibility of an emergency interest rate cut by the U.S. Federal Reserve, which recently chose to hold its policy steady. This speculation intensifies as the Japanese yen’s 13% plummet adds to the chaos, impacting markets across Korea, Taiwan, and the cryptocurrency sector significantly.
Major Cryptos Plummet, Trading Volumes Surge
Bitcoin and Ethereum, the two largest cryptocurrencies by market capitalization, experienced substantial losses. Bitcoin fell by 9% and Ethereum by 18% within the last 24 hours, hitting their lowest levels in over five months. Trading volumes surged dramatically, increasing by over 214% on Sunday compared to Saturday. Bitcoin, Solana, and Ethereum dominated trading activity, accounting for approximately 67% of all volume late Sunday.
Emergency Interest Rate Cuts on the Horizon?
Amid the market chaos, speculation about an emergency interest-rate cut by the Federal Reserve has intensified. Bond traders are increasingly betting on the likelihood that the US economy will deteriorate swiftly enough to necessitate aggressive easing of monetary policy. Bloomberg reports that traders now see a roughly 60% chance of an emergency quarter-point cut within the next week, potentially ahead of the Fed’s next scheduled meeting.
Cowen Highlights Market Deja Vu with Fed Rate Moves in 2019 and 2024This sentiment is echoed by CNBC Crypto Trader Ran Neuner, who highlighted the urgency of a rapid Federal Reserve response to avoid a financial meltdown that could surpass the 2008 crisis. “It’s an election year. I’m expecting emergency action,” Neuner tweeted.
Japanese Market Woes Amplify Crypto Selloff
Japan’s stock market has also been a significant contributor to the current volatility. The Nikkei and TOPIX indices have both dropped by over 8%, marking the worst loss for Japan’s stock market since 1987. This decline follows the Japanese central bank’s recent interest rate hike, which has spurred recessionary fears. The yen fell to its lowest level against the US dollar since January 2024, adding pressure to Japanese stocks.
Geopolitical and Economic Factors Add to Investor Anxiety
The broader economic outlook is fraught with uncertainties, including geopolitical tensions in the Middle East and questions over the sustainability of heavy investments in artificial intelligence. These factors have collectively contributed to the skittishness among investors and the intense market selloff.
The Federal Reserve’s ambivalence about future rate cuts has only added to the market’s nervousness. Many traders had anticipated a rate cut in September, and the Fed’s hesitancy may have further spooked investors, leading to a mass selloff.
