Bitcoin declined slightly on Wednesday, continuing the downward trend that began with a sharp liquidation wave earlier this week, while traders continued to assess cautious remarks from Federal Reserve Chair Jerome Powell, with anticipation for the release of key US inflation data.

Bitcoin was last down by 0.2% to trade at $112,790.5 as of 02:11 AM Eastern Time (06:11 GMT), remaining near its lowest levels in two weeks.

Bitcoin holds its losses after liquidation wave… and anticipation of Fed policy

Bitcoin had dropped by nearly 3% on Monday, after about $1.5 billion worth of positions were liquidated in the cryptocurrency market in a single day.

This wave of liquidations was the largest since last March, and it led to forced selling in derivatives markets, causing sharp losses for Ethereum and other altcoins.

The decline was further exacerbated by some traders’ positioning in directional bets through options contracts, which benefit from sharp volatility, according to reports.

This collapse came just days after Bitcoin and other digital assets initially rallied following the Fed’s move to cut interest rates by 25 basis points last week, in the first monetary easing in several months.

But that optimism did not last long, as risk appetite quickly reversed with the cautious tone adopted by the Fed regarding monetary policy outlook.

In his speech, Fed Chair Jerome Powell said the central bank must act cautiously in considering further reductions in borrowing costs. He acknowledged that labor market weakness may allow room for additional easing, but warned that excessive cuts could undermine progress made in fighting inflation.

Attention now turns to the release of the Personal Consumption Expenditures (PCE) price index in the United States, the Fed’s preferred measure of inflation, scheduled for Friday.

Bloomberg: Tether seeks to raise up to $20 billion at $500 billion valuation

Bloomberg reported on Tuesday that Tether, based in El Salvador and issuer of the USDT stablecoin, is in early talks to raise between $15 billion and $20 billion through a private placement, in a deal that could value the company at about $500 billion.

According to the report, the proposed deal would involve the sale of around 3% of the company’s shares.

CEO Paolo Ardoino said on Wednesday that the company is indeed considering raising capital from a group of prominent investors.

Oil prices rose on Wednesday after an industry report showed a decline in US crude inventories last week, amid growing market concerns over tight supply due to export disruptions in Kurdistan and Venezuela, as well as Russian supply outages.

Brent crude futures gained 40 cents, or 0.6%, to $68.03 a barrel by 1000 GMT, while US West Texas Intermediate (WTI) crude rose 38 cents, or 0.6%, to $63.79.

Tamas Varga, analyst at PVM Oil Associates, said: “The market had been expecting a supply surplus and global inventory build-up in the final quarter of the year, but attention has recently shifted back to Eastern Europe and the possibility of new sanctions on Russia.”

He added that delays in resuming Kurdish oil exports, along with Chevron’s reduction of Venezuelan shipments due to issues with US permits, had added to short-term bullish momentum.

Both benchmarks had climbed by more than $1 per barrel on Tuesday after a deal to restart exports from Iraq’s Kurdistan region stalled, halting pipeline shipments that were expected to reach 230,000 barrels per day to Turkey. Flows through the line have been suspended since March 2023.

Elsewhere, US President Donald Trump said on Tuesday he believed Ukraine could retake all territories occupied by Russia, a sudden shift in rhetoric favoring Kyiv. Earlier this month, the Trump administration urged EU nations to accelerate efforts to phase out Russian oil and gas.

Russia, meanwhile, is facing shortages of certain fuel types, according to traders and distributors, as refinery operations decline due to Ukrainian drone attacks. Kyiv has stepped up strikes on energy infrastructure in a bid to reduce Moscow’s export revenues.

Iranian Oil Minister Mohsen Paknejad said on Tuesday that “no new burdensome restrictions” would be imposed on the country’s oil sales, stressing that exports to China would continue, even as Tehran and European powers struggle to reach an agreement to prevent the return of UN sanctions this week.

Data from the American Petroleum Institute (API) showed US crude and gasoline inventories fell last week, while distillate stocks increased, according to market sources.

Official US government energy data is due later on Wednesday. However, a Reuters poll of eight analysts ahead of the release suggested that crude and gasoline inventories likely rose in the week ending September 19, while distillate stocks were expected to decline.

On a broader level, the global oil market is bracing for oversupply and weaker demand. The International Energy Agency said in its latest monthly report that global oil supplies will expand at a faster pace this year, with the surplus set to widen further by 2026.

The US dollar rose slightly on Wednesday, recovering from its lowest level in nearly a week, after Federal Reserve Chair Jerome Powell struck a cautious tone regarding further monetary easing, even as markets continue to price in two additional rate cuts this year.

The euro, meanwhile, remained broadly steady despite data showing an unexpected decline in German business confidence in September, as the Ifo Business Climate Index fell to 87.7 from 88.9 in August amid weak economic expectations. The euro last traded down 0.4% at $1.177, though it was little changed against other currencies such as the British pound and Swiss franc, reflecting investor demand for the dollar. Sterling fell 0.3% to $1.34820.

Rate Cuts Under the Microscope

Market focus is now firmly on expectations for two quarter-point rate cuts at the Fed’s remaining meetings this year, along with another reduction anticipated in the first quarter of 2026, in line with the central bank’s guidance after last week’s policy meeting.

US data this week will be key, particularly Friday’s release of the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, which will be critical in shaping expectations for the next steps in monetary policy.

Francesco Pesole, FX strategist at ING, said: “We still see the risks tilted toward a weaker dollar with Friday’s core PCE reading. A monthly print of 0.2% would reinforce expectations for two rate cuts this year, unless the geopolitical picture in Europe deteriorates.” He added that dollar moves have been limited given Powell essentially repeated the same cautious stance he laid out last week.

At that time, the dollar rebounded from its lowest level since early 2022 after the Fed’s policy announcement and Powell’s press conference, which turned out to be less dovish than markets had anticipated following a sharp deterioration in labor market data.

US Dollar Index Adds 0.35%

The dollar index, which tracks the currency against six major peers, rose 0.35% on Wednesday to 97.575, attempting to claw back losses after two straight sessions of declines. It had touched 97.198 in overnight trading, its lowest level since Thursday.

James Knifton, senior corporate FX dealer at Convera, said: “Powell acknowledged there are no risk-free policy options, warning that premature easing could entrench inflation, while excessive tightening could unnecessarily harm job prospects.”

Against the Japanese yen, the dollar rose 0.29% to 148.065 yen.

Candidates for the leadership of Japan’s ruling Liberal Democratic Party answered questions from reporters on Wednesday. Frontrunner Sanae Takaichi, known for her accommodative monetary stance, said policy is the responsibility of the Bank of Japan but cautioned that rate hikes could weigh on mortgages and corporate investment.

Asian Markets: Australian and New Zealand Dollars

The Australian dollar rose 0.23% to $0.66140, reversing earlier minor losses, after consumer price inflation accelerated to 3% in August from 2.8% in July, beating the 2.9% consensus forecast, less than a week before the Reserve Bank of Australia’s next policy meeting.

However, the picture was complicated as a key measure of core inflation slipped to 2.6%. Traders slightly trimmed bets on a rate cut by year-end to around 33%, according to LSEG data, while markets still expect no change at the September 30 meeting.

Data suggest persistently high prices may constrain the RBA’s ability to cut rates to support a weak labor market, though the inflation jump largely reflects the expiry of energy subsidies and may not be as negative as it appears, said Kyle Rodda, analyst at Capital.com.

The New Zealand dollar was steady at $0.5851 after the appointment of a new central bank governor. Finance Minister Nicola Willis announced on Wednesday that Swedish central banker Anna Breman will take over as governor of the Reserve Bank of New Zealand on December 1, becoming the first woman to hold the post.

Gold prices declined in the European market on Wednesday for the first time in the last four sessions, retreating from record highs, as correction and profit-taking activity intensified, in addition to pressure from the strong rise of the US dollar in the foreign exchange market.

This comes after cautious remarks from Federal Reserve Chair Jerome Powell regarding further monetary easing in the United States, which increased doubts about two additional rate cuts during the remainder of this year.

Price Overview

• Gold prices today: Gold fell by about 0.4% to $3,750.82, from the opening level at $3,764.29, with a session high at $3,772.33.

• At Tuesday’s settlement, gold gained 0.5%, marking a third consecutive daily rise and a new record high at $3,791.13 per ounce.

US Dollar

The dollar index rose on Wednesday by 0.4%, on track for its first gain in the last three sessions, reflecting a strong rebound in the US currency against a basket of major and minor counterparts.

This recovery comes amid growing doubts over two additional rate cuts before year-end, especially after Powell adopted a cautious tone on further monetary easing.

US Interest Rates

• Powell said on Tuesday that the central bank will continue to balance concerns surrounding labor market weakness and growing inflation risks.

• According to CME Group’s FedWatch tool: the probability of a 25-basis-point rate cut at the October meeting is currently priced at 92%, while the probability of no change stands at 8%.

• To reprice these probabilities, investors are closely monitoring upcoming US economic data and comments from Federal Reserve officials.

Gold Outlook

• Ole Hansen, Head of Commodity Strategy at Saxo Bank, said: “The recent gold rally is fueled by falling US funding costs, alongside a mix of investor concerns, including overvalued equities, Fed independence, and rising geopolitical risks.”

• Ricardo Evangelista, Senior Analyst at ActivTrades, said: “With geopolitical turmoil and economic uncertainty driving safe-haven demand, and expectations of a looser monetary stance by the Fed growing, gold is expected to hold above $3,750 in the short term, with potential for a new resistance level at $3,900.”

SPDR Fund

Gold holdings with the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged on Tuesday at 1,000.57 metric tons, the highest since August 3, 2022.