After the US Federal Reserve (Fed) announced a 25 basis point interest rate cut on Wednesday, the price of Bitcoin fell below $100,000, triggering a widespread crash in the cryptocurrency market. This selling pressure was a reflection of the market reaction to the Fed’s monetary policy direction for 2025 and beyond. In addition to Bitcoin, major altcoins such as Ethereum (ETH), Dogecoin (DOGE), XRP, Solana (SOL) also lost between 5% and 10%, causing more than $860 million in liquidations.
Fed Chair Jerome Powell’s announcement that he planned to cut interest rates only two times in 2025, taking a more hawkish tone, caused Bitcoin to fall below the critical $100,000 support level. This decline came just after Bitcoin reached an all-time high of $108,000 at the beginning of the week, erasing all of BTC’s weekly gains.
Powell reinforced his hawkish stance by stating that the Fed is determined to bring inflation to its 2% target and that this could take 1-2 years. Blockchain analysis platform Santiment reported that Bitcoin showed a stronger performance compared to the S&P 500. "This could be a sign of strength for Bitcoin when markets calm down in the next 24-48 hours," Santiment said.
With the Fed statements and the market crash, Bitcoin ETFs in the US also saw a negative impact. ETFs such as Bitwise’s BITB, Invesco’s BTCO, Ark Invest’s ARKB, and Grayscale’s GBTC saw net outflows. However, BlackRock’s IBIT ETF somewhat offset this negative impact with a strong inflow of $356 million. This shows that although crypto market analysts still have a positive outlook, there is still uncertainty in the markets.
Popular economist Alex Kruger commented, “There is a Christmas holiday next week, which could change the situation. I think it would be ideal for Bitcoin to bounce from $98,000 and Solana from $195. Then it only goes up until the opening. The euphoria and leverage in cryptos have largely cleared, which minimizes downside risks.”
The Bank of Japan decided to keep its short-term policy rate at -0.1% on Thursday, opting to monitor wage growth and inflation trends without making any changes. The decision reflects a cautious approach to monetary policy. In addition, the central bank’s reluctance to increase borrowing costs has led to further depreciation of the yen against the dollar, pushing it past the critical 155 level. This development has helped Bitcoin price recover from lows below $100,000, with BTC currently trading at $101,020.
According to Coinglass data, liquidations of long positions in Bitcoin increased from $114 million to $148 million in the past 24 hours, indicating that the impact of market volatility and Fed statements are putting significant pressure on investors.