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The Federal Reserve reduced interest rates by 25 basis points, putting them down to a range of 4.25% to 4.5%. While this was predicted, the crypto market dropped due to fears over the Fed's estimate for 2025. The Fed cut off its expected rate losses for 2025 from four to two, showing a strong position. Inflation estimations for 2025 were also boosted from 2.1% to 2.5%, which alarmed investors.
Bitcoin dropped by 5.4% and Ethereum by nearly 6%, while other currencies such as Solana, XRP, and Dogecoin faced significant losses. Within 24 hours, the crypto market reduced $700 million in liquidations. Stock markets also decreased, indicating how rapidly they respond to Fed decisions.
The Fed's Rate Decision Casts A Shadow On The Cryptocurrency Market Rally.
The Federal Reserve (Fed) reduced interest rates by 25 basis points on Wednesday, reducing the federal funds rate from 4.25% to 4.50% following the December meeting. The decision to reduce interest rates by 25 basis points was in line with market forecasts. However, the crypto market dropped following the Fed's announcement.
This is because the market response may be affected by the projection for 2025 rather than the decision to drop the rate in December. Fed Chair Jerome Powell claimed that the apex bank changed its 2025 projection and decreased the number of probable cuts from four to two. This indicates a more hawkish perspective for the New Year, leading to a sell-off in the crypto market.
Similarly, the Fed increased its PCE inflation forecast from 2.1% to 2.5% by the end of 2025, saying that inflation may increase in the next year. It may also have an effect on the present bull rise in the crypto market, as investors now predict unfavorable market action next year.
After the statement, Bitcoin dropped 5.4% to $100,314, while the whole crypto market dropped $200 million in market capitalization. Most popular altcoins fell alongside Bitcoin, including Ethereum, which has dropped almost 6% in the last 24 hours. Other tokens, like Solana, XRP, and Dogecoin, have lost by 7%, 10%, and 9%, respectively.
The recent decrease caused $675 million in liquidations in the last 24 hours, with Ethereum and Bitcoin experiencing raised liquidations of more than $100 million each. The stock market also started to drop, with the S&P 500 sinking dramatically following the Fed decision, showing a close correlation between cryptocurrency and the stock market response to Federal Reserve actions.
Key Takeaways
- The Federal Reserve has presented a hawkish decision to lower interest rates twice in 2025.
- Solana, XRP, and Dogecoin all experienced reductions of nearly 10%.
- The cryptocurrency market has experienced approximately $700 million in selling in the last 24 hours.
