Bitcoin Plunges; Central Banks Signal Major Economic Shifts

UPDATE: Bitcoin has plunged sharply, erasing all its gains for 2025 as central banks signal significant economic shifts. Over the weekend, critical announcements from the Federal Reserve and the European Central Bank have put investors on high alert.

In a notable statement, Atlanta Fed President Raphael Bostic expressed caution regarding potential rate cuts in December, insisting he is not yet convinced that current data justifies further easing. This comes as the ECB’s Olli Rehn warned that euro-zone inflation may fall below the 2% target due to low energy prices and moderating wage pressures. Although he did not rule out a cut in December, he acknowledged potential upside risks.

Adding to the urgency, former Fed Governor Adriana Kugler is under scrutiny after ethics filings revealed numerous trades that allegedly violated strict personal-trading rules. Kugler resigned on August 1, and there remains uncertainty over whether the trades were her own or those of her husband.

In Japan, the government is preparing a massive stimulus package exceeding ¥17 trillion aimed at alleviating cost-of-living pressures while boosting investment in sectors like AI and semiconductors. Cabinet approval is expected on Friday. However, preliminary Q3 GDP data showed an annualized contraction of 1.8%, marking the first decline in six quarters, and further complicating the economic landscape.

The ripple effects of Japan’s economic adjustments are significant. Japanese Government Bonds (JGBs) are seeing yields rise, with the 10-year hitting levels not seen since 2008. This shift signals a troubling end to nearly two decades of ultra-low rates, raising concerns for global markets already feeling the strain.

Tensions are also escalating on the geopolitical front, as four Chinese Coast Guard vessels briefly entered waters administered by Japan near the disputed East China Sea islands. In response, China has issued travel warnings to its citizens regarding Japan, prompting Tokyo to send senior official Masaaki Kanai to Beijing to stabilize relations after Prime Minister Takaichi made comments related to Taiwan.

In the Americas, U.S. Secretary of State Marco Rubio announced intentions to designate the Cartel de los Soles, allegedly led by Venezuelan President Maduro, as a Foreign Terrorist Organization (FTO). Rubio accused the group of corrupting Venezuelan institutions amid intensifying military presence near Venezuela.

As for the financial markets, major FX pairs are trading in subdued ranges, with a slight uptick in the USD. The euro, Australian dollar, New Zealand dollar, British pound, and Japanese yen have all dipped slightly, while gold remains steady and oil prices drift lower. On the upside, U.S. equity futures rose during the Sunday session, buoyed by Berkshire Hathaway’s new $4.3 billion stake in Alphabet, now its 10th-largest holding.

Despite this support, Bitcoin’s dramatic drop has left investors reeling, as it has not only erased its gains but briefly turned negative for the year. With these developments unfolding rapidly, market participants must stay vigilant as the landscape shifts underfoot.

Stay tuned for further updates on these critical economic events.