The Federal Reserve’s (The Fed) decision to lower interest rates has sent ripples through global markets. Bitcoin faced a sharp decline for the first time in four days, retreating from its all-time high of $108,000 on December 18.
On Wednesday (December 18, 2024), The Fed reduced interest rates by a quarter point (0.25%). While this move was widely anticipated by analysts and market observers, projections for limited rate cuts in 2025 led to negative market reactions.
Out of 19 Fed policymakers, the projection for two quarter-point rate cuts in 2025 marked a significant drop from their earlier forecast of four cuts, announced in September.
“I think the slower pace of rate cuts reflects higher inflation readings this year and expectations of elevated inflation in 2025,” said Fed Chair Jerome Powell.
Powell acknowledged that the December decision was closer than previous ones, citing inflation moving “sideways” and reduced risks to the labor market.
This phase, Powell explained, represents a “new process” in the Fed’s approach, with future rate cuts requiring stricter approval standards. Despite this cautious stance, the Fed’s goal remains firm: to bring inflation back to 2% without derailing the labor market or the broader economy.
Widespread Impact of the Rate Cut
The adjusted outlook for rate cuts in 2025 triggered a sharp decline in Wall Street stocks, with the Dow Jones Industrial Average falling 2.5% and the Nasdaq dropping 3.5%.
The crypto market also reacted negatively, with Bitcoin plummeting 5.3% to $100,752 from its early-week high of $108,000.
At the time of writing, altcoins also suffered losses. Ethereum (ETH), Binance Coin (BNB), and Solana (SOL) saw 24-hour declines of 4%, 1.2%, and 3.25%, respectively.
Other altcoins experienced even steeper drops, including Ripple (XRP) at 6.9%, Dogecoin (DOGE) at 6.3%, and Chainlink (LINK) with a nearly 10% drop.
The futures market mirrored these losses, with traders experiencing liquidations totaling $867.58 million in the past 24 hours. Long positions accounted for the bulk of the losses at $746.77 million, according to CoinGlass data. Bitcoin was the second-largest contributor to these liquidations, with total losses reaching $161.88 million.
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