TLDR
- Bitcoin fell 2.6% in 24 hours, trading at $107,854 early Tuesday.
- Spot BTC ETFs saw $40.5 million in net outflows on Monday.
- Fear and Greed Index dropped to 29, signaling fear in the market.
- FedWatch Tool shows 98.9% chance of a 25bps rate cut this month.
Bitcoin dropped below $108,000 on Tuesday, falling 2.6% to $107,854. The move followed mounting trade tensions between the United States and China. Market volatility is expected to persist as investors react to global economic uncertainty. Analysts say the recent pullback was driven by traders reducing exposure ahead of a scheduled meeting between U.S. President Donald Trump and Chinese President Xi Jinping.
Ongoing trade tensions drive market caution
Traders are reacting to renewed geopolitical uncertainty. The upcoming meeting between President Trump and President Xi, scheduled for late October in South Korea, is a key concern. Market participants are adjusting their positions as they await outcomes from this meeting, with many expecting limited progress in resolving trade disputes.
Jeff Mei, Chief Operating Officer at BTSE, noted that these tensions are affecting daily price moves. “Volatility will continue as long as there are trade tensions between the U.S. and China,” he said. According to Mei, the recent decline in Bitcoin was mainly caused by traders reducing exposure to risk ahead of the summit.
Bitcoin had briefly rebounded to over $111,000 earlier this week but failed to hold those gains. The latest drop reflects investor caution amid broader macroeconomic risks.
Altcoins and ETFs also post losses
The wider crypto market saw losses alongside Bitcoin. Ethereum dropped 4.77% to $3,855, while BNB and Solana fell by 5.36% and 4.26%, respectively. Altcoin prices have remained under pressure, with market participants reacting to the same global uncertainty.
Crypto ETFs also experienced a downturn. Spot Bitcoin ETFs recorded $40.5 million in net outflows, while Ethereum-based ETFs saw $145.7 million move out, according to SoSoValue data. Last week, spot Bitcoin ETFs posted their second-largest weekly outflows, totaling $1.23 billion.
Retail and institutional investors are both showing signs of risk aversion. According to The Block’s Fear and Greed Index, market sentiment stands at 29, which falls in the “fear” category. The data suggests that traders are uncertain and leaning towards conservative strategies in the short term.
Analysts expect continued volatility ahead of CPI release
With inflation data expected on Friday, markets are watching closely for new information. The consumer price index (CPI) report is considered a key factor for U.S. monetary policy. A lower-than-expected reading could support the case for a rate cut by the Federal Reserve.
The CME FedWatch Tool shows a 98.9% probability that the Federal Reserve may reduce rates by 25 basis points. A rate cut could ease financial conditions and potentially support risk assets, including cryptocurrencies.
However, Jeff Mei warned that markets remain vulnerable to quick shifts. “Markets can rise and fall at the whims of a single tweet,” he said, referring to how sensitive asset prices are to political and economic developments.
Investors turn to hedging and diversification
Traders are increasingly looking for ways to manage risk. As macro conditions remain uncertain, analysts recommend diversification. Mei stated that investors should consider different asset types to help manage downside exposure.
The recent wave of outflows from ETFs and the selloff in both Bitcoin and altcoins suggest that many are already moving to protect capital. With geopolitical events and economic reports coming soon, volatility is expected to continue.
Market watchers now focus on the outcomes of the Trump-Xi meeting and Friday’s inflation report. Until more clarity emerges, cautious trading is likely to dominate.
