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 charge reduce as anticipated, it additionally signaled fewer cuts in 2025 than beforehand anticipated.
In response, the Bitcoin worth fell by greater than 5%, dropping under the $100,000 mark earlier than displaying slight indicators of restoration. Altcoins noticed across-the-board double-digit share declines.
The Federal Reserve’s determination—whereas assembly expectations for a 25-basis-point discount—got here with a notable shift within the projected charge trajectory for subsequent yr. Somewhat 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 means of the whole 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?
Throughout the crypto sector, the rapid aftermath was pronounced. Matt Hougan, Chief Funding Officer at Bitwise Asset Administration, addressed the market situations this morning by way of X, writing: “The large catalyst at this time 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 property, and the Fed’s announcement brought about a pointy pullback in all danger property.”
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In keeping with Hougan, Bitcoin’s worth motion mirrored heightened sensitivity to shifting financial situations. He famous that Bitcoin worth drop was exaggerated by leveraged positions being liquidated. “$600 million of leveraged lengthy positions have been blown out in at this time’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 at this time’s announcement interrupts the mega-trends: The pro-crypto reversal in Washington coverage, rising institutional adoption and ETF flows, Bitcoin purchases by governments and firms, and main tech breakthroughs within the programmable blockchain house.”
He pointed to technical indicators as a supporting issue for his thesis: “My favourite momentum gauge remains to be constructive: Bitcoin’s 10-day exponential transferring common ($102k) remains to be above its 20-day exponential transferring 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 charge cuts gained’t change that.”
Different market observers provided related interpretations of the Fed’s communication technique. Warren Pies, Founding father of 3Fourteen Analysis, commented by way of X: “By upping inflation forecast, reducing UE charge, and protecting cuts in place, the Fed has really 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 chopping this week so is utilizing a hawkish 2025 FFR dot plot forecast to speak down lengthy bond yields regardless of chopping at this time […] Welcome to macro psyop warfare. Smoke and mirrors child.”
He characterised the dot plots as a software for psychological affect fairly than a strict roadmap: “It’s necessary to view the dot plots not as a future forecast of occasions, however as a psychological software […] The Fed has purchased themselves time to permit additional knowledge to return out earlier than they really make a transfer […] Can virtually 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, provided the same evaluation: “By hawking up all forecasts loads, the Fed lowers the bar materially for cuts subsequent yr. It’s a sensible transfer, if you wish to reduce additional, however don’t wish to precommit.”
At press time, Bitcoin traded at $101,766.
Featured picture created with DALL.E, chart from TradingView.com