Bitcoin‘s value recently dropped below its critical support level of $112,500, plummeting to a new low of $112,201. Altcoins have escaped substantial sell-offs so far, but a pessimistic mood is anticipated to dominate the market in the coming weeks. As the Federal Reserve’s next meeting looms, the impact of market tariffs is intensifying concerns. A recent report from Fitch Ratings has brought potential effects on digital currencies to the forefront.
What Is Driving the Cryptocurrency Market Down?
The Fitch Ratings report highlights a notable slowdown in consumer spending for the first half of 2025, a stark contrast to the end of 2024. Contributors to this decline include unease around trade policy, erratic equity markets, and diminished consumer confidence, all of which curb household expenditure. The job market’s shrinkage is also squeezing household incomes.
According to Economic Research Director Olu Sonola, tariff costs are infiltrating goods prices, heightening inflation. This situation raises the specter of stagflation in the foreseeable future.
Bitcoin’s Struggles with Inflation?
Amid expectations of tighter consumer spending and lower confidence, market enthusiasm is waning. With spending in retreat, confidence on shaky ground, and inflation on the rise, investing in cryptocurrencies seems less prudent for many at this juncture.
Bitcoin is still trading about 10% below its peak, hit by heightened anxieties. Recent Producer Price Index (PPI) numbers suggest gloomy prospects for cryptocurrencies, likely persisting for the next month or two. Bitcoin’s price, once over $120,000, is now precariously close to critical lows, echoing the sell-offs witnessed in early August.
If the downward trajectory continues, Bitcoin might test the $108,000 line, and potentially fall further to $105,300 and $101,200. Continued weakness is anticipated in the immediate future due to comments expected from Powell, which could lead to a test of the $108,000 threshold by Sunday.
In contrast, the medium-term forecast could see a slight uplift from institutional interest in Ethereum and other digital assets. Upcoming ETF approvals in October, along with a potential rebalance in inflation rates, may provide the market some relief.
“The potential for stagflation continues to grow, raising anxieties about economic stability,” said Olu Sonola.
The shifting economic landscape and evolving market dynamics suggest that investors are likely to remain vigilant. As indicators continue to fluctuate, the path forward for cryptocurrencies like Bitcoin remains a topic of keen interest and watchful speculation. Crypto enthusiasts and investors alike are watching the next developments with cautious anticipation.
