Crypto Market Declines Following Federal Reserve’s Rate Cut Announcement
The broader crypto market experienced a downturn following the Federal Open Market Committee (FOMC) meeting on December 18. The US Federal Reserve announced a 25-basis-point rate cut and indicated fewer cuts in 2025 than previously expected, causing Bitcoin's price to drop over 5% below $100,000 before a slight recovery. Altcoins also faced significant declines.
The Fed's decision included a change in the projected rate trajectory for next year, reducing anticipated cuts from four to two. This shift prompted declines across risk assets, with the S&P 500 falling 3% and the Russell 2000 Small Cap Index dropping 4.4%.
Is The Crypto Bull Run Over?
In the immediate aftermath, Matt Hougan, Chief Investment Officer at Bitwise Asset Management, noted the impact of the Fed announcement on market conditions via X. He highlighted that the Fed's decision to lower expectations for future cuts contributed to a sharp pullback in risk assets, including Bitcoin. Hougan mentioned that $600 million in leveraged long positions were liquidated, exacerbating the price decline.
Despite the correction, Hougan maintained a positive outlook, citing ongoing trends such as pro-crypto policy changes, rising institutional adoption, and technological advancements in blockchain. He referenced technical indicators showing that Bitcoin’s 10-day exponential moving average remains above its 20-day counterpart.
Hougan concluded that the Fed's shift in expectations would not derail the long-term bull market, asserting that Bitcoin is in a multi-year upward trend.
Other analysts echoed this view. Warren Pies, Founder of 3Fourteen Research, commented that the Fed's updated forecasts could pave the way for more than two cuts in 2025 if economic data trends favor such moves. Macro analyst Fejau described the Fed's approach as a psychological strategy designed to manage market expectations rather than a strict forecast.
Andreas Steno Larsen, CIO of Steno Global Macro Fund, agreed that the Fed's adjustments lowered the bar for potential cuts next year without committing to specific actions.
At press time, Bitcoin traded at $101,766.
