Bitcoin, XRP, Ethereum Prices Fall Further. What Could Reverse the Crypto Slump.

The world’s largest cryptocurrency, Bitcoin, has fallen over 5% over the past seven days. (ROMAIN COSTASECA/Hans Lucas/AFP via Getty Images)

Key Points

About This Summary

• Cryptocurrencies extended losses Friday, with Bitcoin down 1.9% to $109,017 and Solana down 3.1% to $192.64.
• The crypto market experienced its biggest deleveraging of the year following the Federal Reserve’s interest rate cut.
• Upcoming August PCE inflation data is crucial; hotter-than-expected results could negatively impact risk assets like crypto.

Bitcoin and other cryptocurrencies extended their losses Friday, at the end of a week that has seen the biggest deleveraging of the year. It comes ahead of inflation data, expected to be key for the path of interest rates.

Bitcoin was down 1.9% over the past 24 hours to $109.017, bringing seven-day losses to 5.8%, according to CoinDesk data.

The world’s second largest crypto by market value, Ether , and Ripple’s XRP fell 2.4% and 4.1%, respectively.

Solana has seen the most pronounced losses among bigger cryptos lately as the sector is experiencing a slump. The token was down 3.1% to $192.64 early Friday, extending losses over the past seven days to 19.3%.

S&P 500 and Nasdaq futures were edging up 0.1%, each.

The moves come ahead of the August personal consumption expenditure price index data (PCE), scheduled for 8:30 a.m. Friday. The Federal Reserve lowered interest rates by 25 basis points last week, however, officials say they’d like to see more progress on inflation before committing to more cuts this year, Barron’s has reported.

If PCE data comes in hotter-than-expected, it might push the central bank to pause cuts for now, which would likely have a negative effect on riskier assets like cryptos.

While the inflation numbers could deepen the crypto slump, they could also end up helping tokens regain some losses, particularly if inflation is cooler than expected, increasing rate-cut odds. Higher interest rates tend to dampen traders’ appetite for risk-assets, and vice versa.

The deleveraging event that started earlier this week came as digital-asset investors unwound bullish bets made after the Fed’s latest interest rate cut.

The decline in crypto prices has also affected companies adopting a so-called crypto treasury strategy, most notably Strategy , formerly known as MicroStrategy. It has used debt and preferred stock sales to accumulate enough Bitcoin to be the largest corporate holder of the coin.

Strategy stock traded largely flat in premarket trading Friday, following a 7% drop Thursday.

Write to Elsa Ohlen at elsa.ohlen@barrons.com