Bitcoin, XRP, and Dogecoin took a significant hit, all dropping over 5% following the Federal Reserve’s announcement about a rate cut. On December 18, 2024, Bitcoin plummeted to $99,196, marking a near 6% loss in just 24 hours, after briefly soaring to a record high exceeding $108,000 earlier that week. XRP’s decline reached a staggering 13%, while Dogecoin saw a 12% drop to its lowest in a month at $0.348.
The Federal Reserve’s decision to cut interest rates by 25 basis points has brought the benchmark down to a range of 4.25%-4.50%. However, Fed Chairman Jerome Powell’s comments hinted at a more cautious approach regarding future rate reductions. He mentioned that expected rate cuts in 2025 would likely be smaller, influenced by persistent inflationary pressures. These statements contributed to a wave of caution sweeping across financial markets, with Bitcoin and other cryptocurrencies reacting almost instantly with price declines.
After the announcement, over $690 million in crypto derivatives positions were liquidated, with Bitcoin long positions making up a considerable part of this. This sell-off created turbulence throughout the broader cryptocurrency market, resulting in losses for altcoins like Ethereum, Cardano, and Litecoin, all dropping around 10%.
Powell’s insights included the Fed’s projection that rates might fall to 3.9% by the end of 2025, a lower expectation compared to previous estimates. His remarks reflected a more resilient economy battling enduring inflation. The stock market also reacted adversely, with drops in indices like the S&P 500 and Nasdaq 100, alongside notable losses in cryptocurrency-related stocks such as Coinbase and MicroStrategy.
Bitcoin’s quick response to these macroeconomic factors underscored its vulnerability to traditional financial metrics, illustrating how decentralized assets can intertwine with global economic trends. Typically, lower interest rates support risk assets, including Bitcoin, yet the Fed’s careful tone triggered a sell-off, as traders hurriedly liquidated their positions.
Despite the downturn, Powell clarified Bitcoin’s positioning as an alternative asset, stating it competes more with gold than the U.S. dollar. He also addressed the notion of the U.S. establishing a Bitcoin reserve, reiterating that the Federal Reserve cannot hold Bitcoin and has no intention of pursuing legal changes to allow such ownership.
The ripple effect of Bitcoin’s decline was felt widely across the cryptocurrency spectrum, with major assets witnessing substantial value losses. Ethereum, Solana, and Dogecoin were particularly battered as investor sentiment shifted dramatically following Powell’s remarks regarding the likely slow trajectory of future rate cuts.
Always remember, this information is purely for educational purposes. It’s advisable to conduct your own research before making any significant financial decisions regarding these cryptocurrencies or any investment products. The insights provided reflect the author’s views and do not necessarily indicate the stance of any associated company.
