The crypto market in general experienced a sharp decline after yesterday's Federal Open Market Committee (FOMC) meeting, which was held on December 18th. expectation
In response, the price of Bitcoin fell more than 5%, falling below the $ 100,000 mark before showing small signs of recovery. The exchange rate of Altcoins has risen against the West.
The Federal Reserve's decision – while meeting expectations for a 25-basis point rate cut – came with a notable shift in the projected rate path for next year. Instead of the four cuts previously announced, the central bank now expects only two, indicating a more cautious stance. This rebalancing of monetary policy futures sent ripples through the entire risk asset spectrum, causing the S&P 500 to decline 3% and the Russell 2000 Small Cap Index to decline 4.4%.
Is The Crypto Bull Overrun?
Within the crypto sector, the result was immediately announced. Matt Hougan, Chief Investment Officer at Bitwise Asset Management, addressed market conditions this morning via X, writing: “The big trigger today was the Fed announcement (…) The Fed cut rates by 25 basis points as expected, but lowered expectations for the next year from 4 cuts to 2 cuts. Higher rates are bad for risk assets, and the release of the Fed caused sharp pullback in all risk assets.”
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According to Hougan, Bitcoin's price action showed increased sensitivity to moving currency conditions. He noted that the fall in the price of Bitcoin was contributed by the elimination of leveraged positions. “$600 million of leveraged long positions were blown in today's market, exacerbating the pullback. “
Despite the steep correction, Hougan argued that the broader outlook is still helpful: “Crypto has an inward trend now, and nothing about today's announcement is going to detract from the trends.” mega: pro-crypto revolution in Washington policy, increasing institutional adoption and ETFs are going upBitcoin purchases by governments and corporations, and major technological developments in the programmable blockchain space.”
He pointed to technical indicators as a supporting factor for his thesis: “My favorite momentum gauge remains positive: Bitcoin's 10-day moving average ($102k) remains above its 20-day moving average ($99k). “
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Hougan ended his thread by insisting that the shift in Fed expectations would not stop a long-term bull run, saying: “Crypto's in a multi-year bull market. 50bps of projected rate cuts won't change that.”
Other market observers offered similar interpretations of the Fed's communications strategy. Warren Pies, founder of 3Fourteen Research, said via X: “By raising the inflation forecast, lowering the UE rate, and keeping cuts in place, the Fed has effectively opened the way to more than 2 cuts in 2025 as 'surprise' data to the dark side.”
Well-known macro analysts echoed this sentiment. Crypto analyst and podcaster Fejau (@fejau_inc) described the central bank's approach as a strategy designed to drive market expectations: “The Fed cut itself this week and as he is using the hawkish 2025 FFR dot plot forecast to talk down long bond yields despite today's cut. (…) Welcome to the macro psyop war. Smoke and mirrors for the baby.”
He identified the dot plots as a tool for psychological influence rather than a strict road map: “It is important to look at the dot plots not as a prediction of future events, but as a psychological tool (…) the Fed has bought themselves time to allow more. data to come out before they actually make a move (…) You can almost guarantee that 2025 will not happen as predicted in their dots.”
Andreas Steno Larsen, CIO of Steno Global Macro Fund and CEO of Steno Research, offered A similar assessment: “By significantly slowing all forecasts, the Fed lowers the bar substantially for cuts next year.” It's a smart move, if you want to cut longer, but don't want to make a pre-commitment. “
At press time, Bitcoin was trading at $101,766.
Featured image created by DALL.E, a chart from TradingView.com
