Key Takeaways:
- The interest rate cut by the Fed failed to bring the expected positivity in the crypto market, which instead triggered a massive sell-off, with Bitcoin sinking below $99,000.
- The fears of the Fed slowing its rate cuts in 2025 and increasing inflation have weakened investor sentiment.
- The market has adopted a “wait-and-see” attitude, with investors waiting for further monetary and economic policies that are going to be in place.
The cryptocurrency market just experienced a wild day in the wake of the Federal Reserve’s announcement for a rate cut. Instead of rejoicing, investors have seen a strong sell-off, driving Bitcoin and many other altcoins into steep declines. What does this say for the future of the crypto market, and what is going on?
Shock from the Rate Cut Decision
On December 18, 2024, the Federal Reserve officially announced a cut in the benchmark rate by 0.25% to keep it within the range of 4.25%-4.50%. This, in general, would sound positive, since a cut in the interest rate would normally boost so-called ‘risky assets,’ including cryptocurrencies. The market, however, reacted quite contrarily, starting to move completely in the opposite direction.
Why is the Crypto Market “Bleeding”?
- Doused Expectations: The crux of the issue lies in signals about 2025. Powell suggested the Fed has tempered expectations and now sees two interest rate cuts next year instead of four. That hawkish reassessment has led investors to worry the monetary policy will be less “accommodative” than their expectations.
- Accelerating Inflation: The Fed also increased its projection for PCE inflation at the end of 2025 to 2.5% from 2.1%, hinting that inflationary pressures persist, and a soft rate cut by the Fed would be hard to implement soon.
- Panic Selling: These factors combined helped dampen market sentiment. Investors are worried about slower economic growth prospects and a potential decline in capital flow into cryptocurrencies. The result has been a complete sell-off.
More News: How Does This Latest US Inflation News (CPI at 2.7%) Reflect at The Crypto market?
Crypto Market “Shaken”
Bitcoin Plummets
Immediately after the Fed’s move, Bitcoin fell nearly 5.4%, to $100,314. The cryptocurrency had surged to $108,000 following this week’s CPI data, which showed inflation cooled more than expected. The euphoria was short-lived.
Bitcoin fell
Altcoins Take a Hit
It was not the only casualty. Leading altcoins also suffered. Ethereum declined by more…
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