Bitcoin fell as concern over China and caution ahead of this week’s Federal Reserve meeting weighed on U.S. stock index futures. Speculation that the U.S. government may declare stablecoins as a risk to the financial system could be adding to uncertainty in the crypto market.

The top cryptocurrency by market value is currently priced at $44,800, down 5% on the day. The broader market is a sea of red with ether, cardano, and solana nursing losses of as much as 7%, CoinDesk 20 data show.

Futures tied to the S&P 500, Wall Street’s main equity index and the global benchmark for risk assets, are trading 1% lower alongside similarly sized losses in European stock indexes and shares in Hong Kong and Japan.

“Investors look to be taking risk off the table on fears that [a] crisis at China Evergrande Group may become a systemic problem to global markets,” Pankaj Balani, CEO of Delta Exchange, said. “Markets will also be looking at the Fed commentary later this week to make sure that there are no changes in liquidity from the central bank.”

Evergrande fell more than 10% in Hong Kong early today, taking the year-to-date drop to 85% on concerns the cash-strapped property giant might default on $83.5 million in interest payments due this Thursday. Chinese authorities have already told major lenders that the company is likely to miss payments. While some observers have called the Evergrande crisis China’s “Lehman moment,” Messari’s Mira Christanto says such fears are overblown.

The two-day Fed meeting, which concludes on Wednesday, will be keenly watched by investors for clarity on the central bank’s plans to scale back, or taper, the liquidity-boosting stimulus program.

Communications from the Fed members have been hawkish in recent weeks, with many calling for a beginning of the taper before the year-end. Bitcoin and other asset prices, in general, could face selling pressure if this week’s meeting confirms that tapering will begin in October or November.

The greenback is rising ahead of the Fed meeting, reflecting a flight to safety and speculation the central bank would signal October or November taper. The dollar index, which tracks the currency’s value against major fiat currencies, has jumped to a one-month high of 93.34, extending a two-day winning streak, according to TradingView.

Aside from macro factors, impending regulatory action on stablecoins – the dollar-pegged cryptocurrencies that promise stability and act as a gateway to crypto markets – could be adding to selling pressure around bitcoin.

An article published by The New York Times on Sunday said U.S. regulators are concerned that stablecoins may become a source of volatility and may bring the dollar-pegged currencies under regulatory purview by declaring them as a risk to the financial system, or treat them as securities, money market mutual funds or as banks. While Washington’s discomfort with stablecoins is not new, the fact that mainstream media outlets ran a cover story suggests regulation is coming soon.

A recent Bloomberg report said officials are considering launching a formal review by the Financial Stability Oversight Council into whether stablecoins pose an economic threat, a process that could bring more severe oversight on the rapidly expanding industry. The total market capitalization of all stablecoins, including tether, has seen a near 10-fold rise to $115 billion over the past 12 months. A regulatory crackdown may bring short-term pain to crypto markets.

These issues, coupled with the quarterly bitcoin options expiry due this Friday, may keep the cryptocurrrency volatile this week. Balani said, however, the underlying trend will remain bullish while bitcoin holds above $40,000.

Past data shows September dips pave the way for larger bull runs, particularly those seen after a halving year. Bitcoin underwent its third mining-reward halving in May last year. The first and the second halvings took place in 2012 and 2016.

Bitcoin

Bitcoin dipped 1.37% in September 2013 only to rally from $100 to $1,100 in the following two months. It staged a similar rally after the September 2017 dip of 8%.


All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Weekly Forecast: BTC nosedives below $95,000 as spot ETFs record highest daily outflow since launch

Bitcoin Weekly Forecast: BTC nosedives below $95,000 as spot ETFs record highest daily outflow since launch

Bitcoin price continues to edge down, trading below $95,000 on Friday after declining more than 9% this week. Bitcoin US spot ETFs recorded the highest single-day outflow on Thursday since their launch in January.

More Bitcoin News
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers

Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers

Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins. 

More Bitcoin News
Solana Price Forecast: SOL’s technical outlook and on-chain metrics hint at a double-digit correction

Solana Price Forecast: SOL’s technical outlook and on-chain metrics hint at a double-digit correction

Solana (SOL) price trades in red below $194 on Friday after declining more than 13% this week. The recent downturn has led to $38 million in total liquidations, with over $33 million coming from long positions.

More Solana News
SEC approves Hashdex and Franklin Templeton's combined Bitcoin and Ethereum crypto index ETFs

SEC approves Hashdex and Franklin Templeton's combined Bitcoin and Ethereum crypto index ETFs

The SEC approved Hashdex's proposal for a crypto index ETF. The ETF currently features Bitcoin and Ethereum, with possible additions in the future. The agency also approved Franklin Templeton's amendment to its Cboe BZX for a crypto index ETF.

More Cryptocurrencies News
Bitcoin: 2025 outlook brightens on expectations of US pro-crypto policy

Bitcoin: 2025 outlook brightens on expectations of US pro-crypto policy

Bitcoin price has surged more than 140% in 2024, reaching the $100K milestone in early December. The rally was driven by the launch of Bitcoin Spot ETFs in January and the reduced supply following the fourth halving event in April.

Read full analysis
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

BTC

ETH

XRP