Bitcoin Slides to $101K as Federal Reserve’s Hawkish Stance Jolts Markets
The Federal Reserve announced a 25-basis-point rate cut, reducing its benchmark funds rate to a range of 4.25%-4.50%. This move marks the Fed’s third rate cut of the year, totaling 100 basis points since September. While widely anticipated, investors were rattled by the central bank’s updated projections and Fed Chair Jerome Powell’s cautious tone during the subsequent press conference.
According to the Fed’s latest “dot plot,” policymakers anticipate the federal funds rate to end 2025 at 3.9%, a higher forecast than the 3.4% projected in September. Inflation expectations also ticked upward, with Personal Consumption Expenditures (PCE) inflation for 2025 now forecast at 2.5%, compared to the previous estimate of 2.1%.
The announcement had an immediate impact on the cryptocurrency market. Bitcoin (BTC) dropped sharply from $104,000 to $101,000, a 5% decline over 24 hours. Altcoins faced steeper losses, with XRP, Cardano’s ADA, and Litecoin’s LTC plummeting nearly 10%. The downturn was mirrored in traditional equities, as the S&P 500 slid to session lows.
Powell attributed the slower pace of future rate cuts to persistent inflation pressures and noted, “We are approaching the neutral rate, which explains the tempered path ahead.” When asked about the idea of the U.S. government establishing a strategic Bitcoin reserve, Powell dismissed the notion, citing Federal Reserve Act restrictions that prevent the central bank from owning digital assets.
Analysts weighed in on the implications of the Fed’s stance. Andre Dragosch, Head of Research at Bitwise, commented, “Despite rate cuts, financial conditions remain tight, with rising bond yields, higher mortgage rates, and a strong dollar contributing to a macro environment unfavorable for Bitcoin and other cryptos.”
However, Dragosch highlighted a silver lining: “On-chain metrics for Bitcoin remain robust, particularly the continued decline in exchange balances. This trend supports the narrative of a tightening Bitcoin supply, which could offset some of the broader macro risks.”
As markets digest the Fed’s announcement, investors remain cautious, with Bitcoin’s next move hinging on both macroeconomic developments and underlying blockchain dynamics.
