The broader crypto market skilled a pronounced downturn following yesterday’s Federal Open Market Committee (FOMC) assembly, held on December 18. After the US Federal Reserve delivered a 25-basis-point fee reduce as anticipated, it additionally signaled fewer cuts in 2025 than beforehand anticipated.
In response, the Bitcoin worth fell by greater than 5%, dropping beneath the $100,000 mark earlier than displaying slight indicators of restoration. Altcoins noticed across-the-board double-digit proportion declines.
The Federal Reserve’s choice—whereas assembly expectations for a 25-basis-point discount—got here with a notable shift within the projected fee trajectory for subsequent yr. Quite than the beforehand communicated 4 cuts, the central financial institution now anticipates solely two, signaling a extra cautious stance. This recalibration of future financial coverage despatched ripples by all the danger asset spectrum, prompting the S&P 500 to say no 3% and the Russell 2000 Small Cap Index to drop 4.4%.
Is The Crypto Bull Run Over?
Inside the crypto sector, the quick aftermath was pronounced. Matt Hougan, Chief Funding Officer at Bitwise Asset Administration, addressed the market circumstances this morning by way of X, writing: “The massive catalyst right this moment was the Fed announcement […] The Fed reduce charges by 25 foundation factors as anticipated, however lowered expectations for subsequent yr from 4 cuts to 2 cuts. Increased charges are unhealthy for danger belongings, and the Fed’s announcement caused a pointy pullback in all danger belongings.”
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In accordance with Hougan, Bitcoin’s worth motion mirrored heightened sensitivity to shifting financial circumstances. He famous that Bitcoin worth drop was exaggerated by leveraged positions being liquidated. “$600 million of leveraged lengthy positions had been blown out in right this moment’s market, exacerbating the pullback.”
Regardless of the steep correction, Hougan argued that the broader outlook stays constructive: “Crypto now has inside momentum, and nothing about right this moment’s announcement interrupts the mega-trends: The pro-crypto reversal in Washington coverage, rising institutional adoption and ETF flows, Bitcoin purchases by governments and companies, and main tech breakthroughs within the programmable blockchain area.”
He pointed to technical indicators as a supporting issue for his thesis: “My favourite momentum gauge continues to be constructive: Bitcoin’s 10-day exponential shifting common ($102k) continues to be above its 20-day exponential shifting common ($99k).”
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Hougan concluded his thread by sustaining that the shift in Fed expectations wouldn’t derail the longer-term bull run, stating: “Crypto’s in a multi-year bull market. 50bps of projected fee cuts gained’t change that.”
Different market observers supplied comparable interpretations of the Fed’s communication technique. Warren Pies, Founding father of 3Fourteen Analysis, commented by way of X: “By upping inflation forecast, decreasing UE fee, and protecting cuts in place, the Fed has truly opened the trail to greater than 2 cuts in 2025 as knowledge ‘surprises’ to the dovish aspect.”
Famend macro analysts echoed this sentiment. Crypto analyst and podcaster Fejau (@fejau_inc) described the central financial institution’s strategy as a method designed to information market expectations: “Fed pressured itself into reducing this week so is utilizing a hawkish 2025 FFR dot plot forecast to speak down lengthy bond yields regardless of reducing right this moment […] Welcome to macro psyop warfare. Smoke and mirrors child.”
He characterised the dot plots as a instrument for psychological affect moderately than a strict roadmap: “It’s vital to view the dot plots not as a future forecast of occasions, however as a psychological instrument […] The Fed has purchased themselves time to permit additional knowledge to return out earlier than they really make a transfer […] Can nearly assure you 2025 won’t happen as is forecasted of their dots.”
Andreas Steno Larsen, CIO of Steno World Macro Fund and CEO at Steno Analysis, offered an analogous evaluation: “By hawking up all forecasts so much, the Fed lowers the bar materially for cuts subsequent yr. It’s a smart transfer, if you wish to reduce additional, however don’t need to precommit.”
At press time, Bitcoin traded at $101,766.
Featured picture created with DALL.E, chart from TradingView.com