Bitcoin and Stock Markets Fall as Fed Maintains Hawkish Stance

TLDR

• Bitcoin dropped 3% in 24 hours and is trading just above $100,000 as stock markets sold off Thursday with the Nasdaq down 2% and S&P 500 down 1.2%
• Crypto-related stocks took heavy losses with Strategy (MSTR) down 5.9% to $238, now trading 6.8% lower year-over-year and 56% below its post-election peak of $543
• Major crypto exchanges and mining stocks fell sharply with Coinbase down 5.6%, Robinhood down 8.5%, and several mining companies losing over 8%
• Markets continue reacting to the Fed’s hawkish stance last week when Chairman Powell suggested no rate cut in December despite weak economic data
• The ongoing government shutdown has delayed key economic reports including the October jobs report and removed billions from the economy

Stock markets experienced sharp declines Thursday as both traditional and cryptocurrency markets fell together. The Nasdaq dropped 2% while the S&P 500 lost 1.2% by midday on the east coast.

Bitcoin fell 3% over 24 hours and was barely holding above the $100,000 mark. Other cryptocurrencies performed worse with Ether, XRP, Solana, and Dogecoin declining between 2% and 6%.

Crypto Stocks Face Steep Losses

Crypto-related stocks saw even steeper losses than digital currencies. Coinbase dropped 5.6% while Gemini fell 3%. Bullish declined 8% and Galaxy Digital lost 5.1%.

Robinhood stock dropped 8.5% despite reporting strong earnings the previous day. The earnings beat was partly driven by increased crypto trading activity on the platform.

Strategy, Michael Saylor’s bitcoin treasury company, led the sector downward with a 5.9% decline. The stock now trades at $238, down 6.8% compared to one year ago. This marks a major reversal from its peak of $543 reached after President Trump’s 2024 election victory. The stock has now fallen 56% from that high.

Bitcoin mining stocks also faced pressure. Companies like Hut 8, IREN, and Cipher Mining each dropped more than 8%. Many of these firms had seen gains this year after pivoting to provide AI infrastructure services.

Federal Reserve Policy Concerns

Markets have been reacting to the Federal Reserve’s surprise hawkish turn last week. Chairman Jerome Powell dampened expectations for a rate cut at the December meeting. Several other Fed members have since echoed his cautious stance.

The central bank may be overlooking signs of economic weakness. New data released Thursday showed job layoffs in October reached their highest level for that month in over 20 years. This could mark the worst year for layoffs since 2009.

CarMax, a used-car sales company viewed as an economic indicator, provided a troubling outlook. The company’s CEO unexpectedly stepped down and shares fell 20%. McDonald’s warned about economic pressure on its customers. Other restaurant chains including Chipotle and Cava have shared similar concerns.

Government Shutdown Impact

The federal government shutdown continues longer than most analysts expected. Polymarket odds suggest an extended closure is likely. The shutdown prevents billions of dollars from flowing through the economy and markets.

The Bureau of Labor Statistics delayed its October jobs report release for the second month. This was the scheduled Friday publication. Economists had forecast a 60,000-job decline and unemployment rising to 4.5% according to a Dow Jones survey.

Stock Futures Show Recovery Attempt

US stock futures climbed modestly Friday morning. Dow Jones Industrial Average futures rose 0.2%. S&P 500 and Nasdaq 100 futures gained 0.2% and 0.3% respectively.

The previous day’s selloff was led by major technology and AI companies. Nvidia, Advanced Micro Devices, and Microsoft all posted sharp losses. The Nasdaq Composite tumbled 1.9% while the Dow shed nearly 400 points.

The S&P 500 has fallen 1.8% for the week. The Dow and Nasdaq are down 1.4% and 2.8% respectively for the week.

Tesla shareholders approved Elon Musk’s $1 trillion pay package in an Austin meeting. The announcement briefly pushed the stock up 2% before gains disappeared in after-hours trading.

Investors are watching several potential catalysts. The end of the government shutdown, a possible December Fed rate cut, and Nvidia’s upcoming earnings report could help stabilize markets. The Supreme Court is also reviewing former President Trump’s tariff policies.

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