Bitcoin Declines as Polymarket Adjusts Fed Interest Rate Cut Predictions
This week, Bitcoin experienced a pullback and established a precarious pattern as traders adjusted their expectations regarding interest rate cuts from the Federal Reserve.
Summary
- Bitcoin’s price decreased following the release of strong producer price index data.
- Polymarket’s odds for Federal Reserve rate cuts have diminished over recent days.
- Technical analysis indicates potential further declines prior to any rebound.
As of Saturday, August 16, Bitcoin (BTC) fell from its all-time high of $124,420 to $117,760. Its market capitalization currently stands at $2.34 trillion, a drop from its peak of $2.47 trillion. This decrease correlates with a reduction in the likelihood of Federal Reserve rate cuts amid rising stagflation worries.
Fed Chair Jerome Powell, contrary to President Trump’s views, sees a robust labor market as one that should be accompanied by price stability. Currently, that balance seems lacking in the U.S., where tariffs introduced on August 7 are contributing to increased costs as businesses pass on import charges to consumers.
Bitcoin impacted by decreased Fed cut expectations
The BTC price surged to a record high of $124,420 on August 14 following an optimistic consumer inflation report from the Bureau of Labor Statistics. Although the core Consumer Price Index rose to 3.1%, the headline rate remained stable at 2.7%.
However, sentiment shifted the following day after producer price index data surged to 3.6% in July, raising concerns over whether the Fed would still proceed with interest rate cuts in September as many analysts had anticipated.
An inflation expectations report published on Friday highlighted additional anxiety. The University of Michigan’s survey indicated that inflation expectations for 2026 rose to 4.9%, with 3.9% projected for the next five to ten years.
These figures, along with a weak nonfarm payrolls report from earlier in the month, suggest that the U.S. economy may be entering stagflation, characterized by high inflation and stagnant growth.
Consequently, Bitcoin’s price retreated as traders reduced their forecasts for Federal Reserve interest rate cuts. Data from Polymarket reveals that the probability of a September cut, while still elevated, has decreased from 80% to 70% as of today.
Historically, Bitcoin tends to perform well when the Federal Reserve is cutting rates or when expectations of such cuts are on the rise.
The price of Bitcoin also faced pressure after Austan Goolsbee, a member of the FOMC, cautioned that the bank required additional data to gauge its next steps, as the effects of the new tariffs would take time to materialize.
Technical Analysis of BTC Price
The daily chart suggests that Bitcoin’s price has been under pressure recently. This began with the formation of a significantly bearish double-top pattern at $123,200, with a neckline positioned at $112,000.
Additionally, a bearish divergence pattern has developed, as indicated by the Relative Strength Index and the MACD indicators, both showing lower lows and lower highs.
As a result, it’s likely that BTC’s price will continue to decline in the upcoming days before resuming an upward trend. A confirmation of further gains would necessitate a rise above the all-time high of $124,420.