Fed cuts rates by 25 basis points as crypto market extends losses

Key Takeaways

The Federal Reserve cut its interest rate by 25 basis points amid mixed economic signals.
The crypto market went down with Bitcoin falling 4% and Ethereum and Solana seeing bigger losses.

The Federal Reserve cut its benchmark interest rate by 25 basis points to a target range of 4.25%-4.5%, signaling a shift in monetary policy amid mixed economic indicators.

This brings the rate a full percentage point below its level in September, when officials began lowering rates.

The Federal Reserve's updated economic projections show GDP growth at 2.5% for 2024 and a gradual decline to 2.0% by 2027.

The unemployment rate is expected to rise slightly to 4.3% in 2025, while inflation, as measured by the PCE index, is expected to be 2.4% for 2024 and 2.5% for 2025, remain slightly above the Fed's 2% target.

The crypto market saw a broad decline ahead of the Fed announcement as traders reduced risk appetite.

The overall crypto market is down 5% in the past 24 hours, with Bitcoin falling 4% from its peak of over $108,000 achieved yesterday.

Ethereum and Solana also saw declines, falling 5% and 6% respectively from their weekly highs of $4,100 for Ethereum and just under $230 for Solana.

Additional uncertainty surrounding President-elect Donald Trump's upcoming policies on tariffs and exports is prompting analysts to wait for those plans to materialize before making pre- to announce the next steps of the Federal Reserve for the coming year.

However, many analysts expect fewer rate cuts in 2025, with current projections suggesting just two rate cuts.

Since Trump's victory on November 6, a “Trump trade” has taken place in the crypto market, with Bitcoin increasing more than 50% and some altcoins gaining more than 200%.

Many traders expect this trend to strengthen further when Trump officially takes office.

However, Arthur Hayes, the former CEO of BitMEX, has suggested that de-risking before Trump's inauguration may be the best bet, anticipating a “sell the news” event.

Fed Chairman Jerome Powell is scheduled to hold a press conference after announcing the Fed's rate cut to provide additional details and guidance on the central bank's policy guidance for 2025.

A story in development