Bitcoin and the broader cryptocurrency market sold off as the Fed announced a 25 basis point cut in its benchmark interest rate and signaled that fewer rate cuts than initially planned could occur in 2025.
Following Fed Chairman Jerome Powell's press conference following the rate cut, the price of Bitcoin (BTC) fell 4.6% to $101,300, while Ether (ETH) fell 5.96% to $3,600.
While market participants had anticipated a 0.25% rate cut, which ticks a box for most traders with bullish price expectations, Powell’s indication that only two more rate cuts would occur in 2025 raised eyebrows. Adding to what some traders see as a hawkish outlook, the Fed committee also raised its inflation outlook for 2025 to 2.5% from 2.1%.
BREAKING: S&P 500 falls sharply after Fed cuts rates by 25 basis points but raises inflation forecast.
The Fed lowered its outlook from 3 to 2 rate cuts in 2025 and raised inflation expectations to 2.5% from 2.1%.
The slight shift in outlook essentially takes into account policy changes that lie ahead with the incoming Trump administration, which is expected to implement tariffs on imported goods, a potential mass deportation of millions of undocumented workers and economic policies that could expand the deficit.
At the press conference, Powell emphasized that the Fed's policy recalibration is a sign that the central bank is ready to adjust its policy to the needs of the U.S. economy.
Regarding Bitcoin's short-term price projections, crypto analyst Skew said that the drop in BTC has cleared 'positioning' in 'both directions' as long positions have been stopped out and 'shorts have been closed in profit.'
Bitcoin price fell into a block bid in the $100,000-$98,000 zone, and the analyst said reclaiming the $100,000-$101,400 zone via spot bids would be essential before the daily candle closes.