The cryptocurrency market, including Bitcoin (BTC), experienced a significant sell-off after the Federal Reserve announced a 25-basis-point cut to its benchmark policy rate. Despite expectations for the rate cut, the Fed's more cautious outlook for 2025 inflation and rate adjustments created uncertainty, leading to market corrections.
Fed's Revised Projections and Bitcoin’s Reaction
Bitcoin's price fell 8.6%, settling at $98,800 after the Federal Reserve indicated a less aggressive approach to rate cuts in 2025. Ethereum (ETH) also faced a sharp decline, dropping nearly 6% to $3,540. While the rate cut was anticipated by traders with bullish sentiments, Fed Chair Jerome Powell’s post-announcement comments created a more cautious tone.
The Federal Open Market Committee revised its inflation target for 2025, raising the forecast from 2.1% to 2.5%. Powell highlighted potential economic challenges stemming from anticipated policy shifts under the incoming Trump administration, including tariffs, deportations, and increased federal spending. These developments contributed to the Fed's updated inflation outlook and tempered expectations for rapid rate reductions.
Market Impact and Analyst Insights
The announcement caused significant volatility in the crypto market. Traders reacted to the news with sell-offs as Powell emphasized the Federal Reserve's readiness to adjust policies to support the U.S. economy. The central bank’s cautious approach signaled fewer rate cuts than previously expected, leaving market participants uncertain about the near-term economic landscape.
Crypto analyst Skew noted that Bitcoin’s price dip cleared positions on both sides of the market, with long positions getting stopped out and shorts profiting. Bitcoin briefly fell into a support zone between $100,000 and $98,000, an area with significant buying interest. Skew emphasized the importance of Bitcoin reclaiming the $100,000 to $101,400 range through spot buying to maintain a bullish outlook.
Looking Ahead
While the Federal Reserve's policy adjustments have created short-term turbulence in the crypto market, many investors are keeping a close watch on economic developments and their potential impact on Bitcoin's trajectory. The ability of Bitcoin to regain key levels before the daily close could be pivotal for the market’s direction in the coming weeks.
As the cryptocurrency market navigates these developments, traders and analysts will continue to assess the broader implications of the Fed's cautious tone and its effects on risk assets like Bitcoin.