Crypto market bleeds following hawkish rate cut decision by Fed

The Federal Reserve announced a hawkish decision to cut interest rates twice in 2025.

XRP, Solana and Dogecoin registered losses of nearly 10%.

The crypto market has seen nearly $700 million in liquidations in the past 24 hours.

Bitcoin and the crypto market are down on Wednesday following the Federal Open Market Committee (FOMC) announcement to slow down rate cuts in 2025, with the benchmark federal funds rate declining to a lower range of 4.25% to 4.50%.

Fed's rate decision casts shadow on crypto market rally

The Federal Reserve (Fed) cut interest rate on Wednesday by 25bps, lowering the federal funds rate to the 4.25% to 4.50% range following the December meeting.

The decision to cut rates by 25 basis points matched expectations from market participants. However, the crypto market declined following the Fed's decision.

This is because the market reaction may not be tied to the rate cut decision for December but the outlook for 2025.

Fed Chair Jerome Powell indicated the apex bank revised their 2025 outlook and dropped the potential cuts from 4 to 2. This suggests a more hawkish outlook for the new year, sparking a sell-off across the crypto market.

Likewise, the Fed raised its expectations for PCE inflation from 2.1% to 2.5% at the end of 2025, indicating that inflation may increase in the new year.

It may also take a toll on the current bull rally that the crypto market has been experiencing, as investors now anticipate unfavorable market activity next year.

After the announcement, Bitcoin retraced to $100,314, dropping 5.4% as the entire crypto market shaved $200 million off its market capitalization.

Most top altcoins dipped alongside Bitcoin, including Ethereum, which has declined over 6% in the past 24 hours.

Other tokens include XRP, Solana and Dogecoin, down by 10%, 7% and 9%, respectively.

The recent decline sparked liquidations worth $675 million in the past 24 hours, with Bitcoin and Ethereum witnessing long liquidations of over $100 million each.