In last night's latest Federal Reserve meeting, the benchmark policy rate was lowered by 25 basis points to a range of 4.25%-4.5%. This outcome, while in line with market expectations, sent ripples through financial markets, especially the cryptocurrency market, due to hawkish language in the meeting statement and adjustments to economic forecasts. Prices of mainstream cryptocurrencies like Bitcoin, Ethereum, Dogecoin, and Solana saw significant declines, with market sentiment severely impacted.
At the press conference, Powell was asked whether the Fed might establish a Bitcoin reserve. He clearly stated that, according to the Federal Reserve Act, the Fed cannot hold Bitcoin or other cryptocurrency assets. Powell emphasized that this issue needs to be submitted to Congress for consideration, and it is not a current focus of the Fed. He reiterated that the Fed's primary task is to control inflation and stabilize the economy, and future policy adjustments will be data-driven to ensure price stability while maintaining economic stability.
The Fed's statement directly triggered a violent reaction in the cryptocurrency market. Bitcoin's price quickly fell by 5.6% after the announcement, briefly touching $99,000. As of the time of writing, the price has rebounded somewhat but has not fully shaken off downward pressure.
Other mainstream cryptocurrencies have seen even more significant declines, with Ethereum down 6.96% to $3,600, Solana declining over 7%, and Dogecoin dropping over 8% due to its high volatility. The altcoin market overall performed particularly poorly, with many second and third-tier assets falling by more than 10%.
In the past 24 hours, a total of 236,199 people globally have been liquidated, with a total liquidation amount reaching $672 million. The largest single liquidation occurred in Binance's ETHUSD_PERP, valued at as much as $4.0677 million.
The Fed's policy considerations highlight inflation risks
The economic forecasts from this meeting clearly demonstrate the Fed's deep consideration of future policies. In addition to lowering unemployment rate expectations, the Fed significantly raised its economic growth and inflation forecasts for 2024 and 2025, reflecting an optimistic outlook on economic growth and a strong emphasis on long-term inflation risks.
Federal Reserve Chairman Powell emphasized at the press conference that although this rate cut aligns with market expectations, future rate cuts will be more gradual. The latest dot plot from the Fed indicates plans to cut rates only twice in 2025, far below the previously expected four times. Additionally, the Fed raised its inflation forecast for 2025 from 2.1% to 2.5%, indicating increased concern about future inflationary pressures.
Opportunities amid adjustments
In the short term, the cryptocurrency market will still face significant adjustment pressure. Whether Bitcoin can hold the critical support level of $100,000 is key to market confidence. The performance of assets like Ethereum and Solana may be even more volatile, as these coins typically exhibit higher sensitivity during market fluctuations.
Bitcoin's rapid decline has cleared both long and short positions from the market, pushing it into a deep adjustment phase. Currently, Bitcoin's price fluctuates within the critical bidding range of $100,000 to $98,000, and if it cannot recover the support level of $100,000 to $101,400 before the daily close, the market may continue to search for new bottom areas.
Despite the subdued market sentiment, this round of adjustments provides a good opportunity for positioning. The price corrections of mainstream assets like Bitcoin and Ethereum may lay the groundwork for the next upward trend, while some undervalued altcoins may see higher rebound potential when the market warms up.
Calm positioning under a hawkish stance
The Federal Reserve's recent monetary policy meeting sent strong hawkish signals, and the cryptocurrency market's violent reaction reflects its sensitivity to changes in the macro environment. In the current environment, caution is warranted, with a focus on macro data and the Fed's policy dynamics to adjust asset allocation strategies. At the same time, one can look for undervalued opportunities amid market adjustments to prepare for potential future rallies.
As Powell stated, the current economic environment remains full of uncertainties, and the market needs time to digest the impacts of policy changes. For the cryptocurrency market, although short-term volatility is intensifying, its long-term growth potential remains promising. In future market games, patience and insight will be key to winning.
