Original title: (After the Fed's hawkish rate cut, the cryptocurrency market overall experiences a correction)
Original author: Alvis, MarsBit
At last night's Federal Reserve's latest policy meeting, the benchmark policy rate was lowered by 25 basis points to a range of 4.25% to 4.5%. Although this outcome was in line with market expectations, the hawkish wording in the statement and adjustments to economic forecasts had a profound impact on market sentiment, resulting in a significant correction in the cryptocurrency market overall. Prices of mainstream cryptocurrencies like Bitcoin, Ethereum, Dogecoin, and Solana all fell significantly.
The Federal Reserve sends hawkish signals, causing market turbulence.
Federal Reserve Chairman Jerome Powell clearly stated at the press conference that although this rate cut was in line with market expectations, the frequency and magnitude of future rate cuts may be far lower than previous market assumptions. Powell emphasized that the Fed only plans to cut rates twice in 2025 and also raised the inflation forecast for 2025 from the previous 2.1% to 2.5%. This adjustment reflects the Fed's deep concern about future inflation pressures.
Powell specifically mentioned the uncertainty of future economic policies, including potential protectionist policies that the incoming Trump administration might implement, such as tariffs on imports, mass deportations of undocumented workers, and potentially expanding the fiscal deficit, which are important reasons prompting the Fed to maintain a more cautious stance. These potential policy changes could further exacerbate inflation pressures, creating widespread impacts on the market.
Bitcoin leads the decline, and the crypto market faces comprehensive pressure.
Bitcoin prices quickly fell by 5.6% to $100,000 after the Federal Reserve announced a rate cut, but have since rebounded.
Ethereum's decline is more pronounced, dropping 6.96% to $3,600. Altcoins like Dogecoin and Solana also did not escape the downturn, with Solana falling over 7% and Dogecoin suffering more than 8% due to high volatility. The broader altcoin market performed particularly poorly, with some second and third-tier assets declining by over 10%.
According to Coinglass data, in the last 24 hours, a total of 236,199 people were liquidated globally, with a total liquidation amount of $672 million. The largest single liquidation occurred on Binance - ETHUSD_PERP worth $4.0677 million.
Cryptocurrency analyst Skew pointed out that Bitcoin's rapid decline has cleared both long and short positions in the market, indicating that the market has entered a deep adjustment period. Bitcoin's price briefly fell into the key bidding range of $100,000 to $98,000, and analysts believe that if it cannot reclaim the support level of $100,000 to $101,400 before the daily close, the market may continue to seek new bottoms.
Economic forecasts highlight inflation risks, with the dot plot showing policy determination.
The economic forecasts from this meeting clearly reflect the Fed's policy considerations. The Fed raised its economic growth forecasts for 2024 and 2025 while lowering its unemployment rate forecasts and significantly raising its inflation forecasts. The particularly large upward adjustment to the 2025 inflation forecast shows the Fed's high regard for long-term inflation risks.
The dot plot shows that the Federal Reserve may only cut rates twice in 2024. This cautious policy stance not only demonstrates its firm determination to control inflation but also prompts the market to reassess the future liquidity environment. The dollar and the volatility index (VIX) surged significantly due to this signal, while U.S. Treasury yields, U.S. stocks, gold, and the cryptocurrency market generally faced pressure.
Short-term outlook: The crypto market faces ongoing adjustments.
In this macro context, the cryptocurrency market may continue to face pressure in the short term. Whether Bitcoin, Ethereum, and other mainstream assets can hold key support levels will significantly impact market confidence. Meanwhile, the performance of altcoins like Solana and Dogecoin may be more volatile, as these assets typically exhibit higher sensitivity during market fluctuations.
Powell repeatedly mentioned the uncertainty of the economic outlook during the press conference and reiterated that future policy adjustments will be data-driven. In the context of a complex global macro environment, investors need to cautiously assess their allocation strategies for crypto assets and closely monitor the upcoming economic data to judge the medium to long-term market trends.
Despite the current bearish market sentiment, analysts generally believe that this round of adjustments also provides strategic placement opportunities for patient long-term investors. The price correction of mainstream crypto assets may lay the groundwork for future increases, and some undervalued altcoins may see higher rebound potential when the market warms up.
Attached is the original statement from Powell:
Recent indicators suggest that economic activity continues to expand at a robust pace. Since the beginning of this year, labor market conditions have generally eased, the unemployment rate has risen, but remains at a low level. The inflation rate has been moving towards the committee's 2% target, but remains slightly elevated.
The committee seeks to achieve full employment and a 2% inflation target over a longer period. The committee judges that the risks to achieving employment and inflation targets are roughly balanced. The economic outlook is uncertain, and the committee is mindful of the bidirectional risks to its dual mandate.
To support its goals, the committee decided to lower the target range for the federal funds rate by 25 basis points to 4.25% to 4.5%. In considering further adjustments to the federal funds rate target range's magnitude and timing, the committee will carefully assess newly received data, evolving outlooks, and risk balances. The committee will continue to reduce holdings of Treasuries, agency debt, and agency mortgage-backed securities. The committee is firmly committed to supporting maximum employment and bringing the inflation rate back to the 2% target.
In assessing the appropriate stance of monetary policy, the committee will continue to monitor how incoming information affects the economic outlook. If risks that could impede the achievement of the committee's goals emerge, the committee will be prepared to adjust the monetary policy stance as necessary. The committee's assessment will consider a wide range of information, including interpretations of labor market conditions, inflation pressures and expectations, and financial and international developments.
Voting in favor of the monetary policy action were: Chairman Jerome Powell, Vice Chairman John Williams, Thomas Barkin, Michael Barr, Raphael Bostic, Michelle Bowman, Lisa Cook, Mary Daly, Philip Jefferson, Adriana Kugler, and Christopher Waller. Beth M. Hammack voted against, preferring to maintain the federal funds rate target range at 4.5% to 4.75%.
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