The Federal Reserve announced a 25 basis point interest rate cut. Originally, the market expected this to bring about a rebound, but subsequent news caused everyone's mood to rapidly cool: the Federal Reserve predicted that the number of interest rate cuts in 2025 will be significantly reduced, and interest rates may remain at a high level, and may not even be cut as sharply as previously expected.
At the same time, Powell made it clear that the Federal Reserve "cannot hold Bitcoin". This remark caused a drastic change in investor sentiment, and Bitcoin fell straight below the $100,000 mark from its historical high of $108,000.
Is this wave of decline an episode in the bull market or a real turning point in the market trend? We can look at it from several aspects:
1. Fed policy and market response
2. Bitcoin market analysis
3. What is the impact of short-term fluctuations on long-term trends? How to deal with it?
4. Key factors and potential risks supporting the crypto market
5. Where are the future opportunities?
1. Federal Reserve policy and market reaction: Why did market sentiment change suddenly?
Last night, the Fed announced a 25 basis point rate cut. The market was expecting a rebound from the news, but Powell's subsequent speech made the mood change 180 degrees. He said that although inflation has fallen, the speed of cooling is not as fast as expected, and the number of rate cuts is expected to be significantly reduced by 2025.
For risky assets such as Bitcoin, high interest rates mean higher capital costs and greater investment risks. Therefore, Bitcoin fell rapidly and market sentiment cooled. In addition, Powell also responded to Trump's proposal to establish a Bitcoin reserve, clearly stating that the Federal Reserve cannot hold Bitcoin and has no intention of changing the existing legal framework. This news has further exacerbated market uncertainty.
2. Bitcoin Market Analysis
From a technical perspective, Bitcoin is now showing signs of short-term adjustments, and the overall bullish momentum has begun to weaken, forming a typical top divergence pattern. On the daily chart, a "top pattern" structure has also appeared, which means that Bitcoin may be under some downward pressure in the short term.
In addition, from the on-chain data, the number of active transaction addresses has decreased, while the inflow of funds to exchanges has increased, indicating that some investors have chosen to take profits at high levels. Risk aversion in the derivatives market is also rising, and the demand for put options has reached a three-month high.
3. Will short-term fluctuations affect long-term trends? How to deal with it?
Although the Fed's policies have caused large market fluctuations in the short term, Bitcoin has experienced similar fluctuations many times, and each time it finds new upward opportunities at key support levels. In fact, adjustments like 20% are more common in bull markets, and pullbacks are actually a good time to buy. Therefore, although the current price has fallen, in the long run, the market support remains strong.
The market sentiment is now panic, and the options market also shows that investors are worried about the short-term decline of Bitcoin. However, the most important thing for investors is to stay calm. When facing market fluctuations, rational analysis and formulating clear trading strategies are key. This short-term adjustment actually provides investors with an opportunity to buy at a low price. If you are an investor who is optimistic about Bitcoin in the long term, now is a good time to "buy low".
4. Key factors and potential risks supporting the crypto market
Although the Fed's hawkish policy has led to increased market volatility, the long-term factors supporting Bitcoin still exist. First, the steady growth of the US economy and the gradual maturity of the crypto market provide a solid foundation for Bitcoin. In addition, the participation of institutional investors has also injected strong support into Bitcoin. During the campaign, Trump expressed his support for cryptocurrencies and proposed a policy to establish a Bitcoin reserve, which is good news for the market. However, Powell's response reminds us that regulatory policies are still full of uncertainty, which cannot be ignored.
But at the same time, the market is also facing certain risks. The strength of the US dollar may put pressure on Bitcoin, because the rise of the US dollar index means that Bitcoin denominated in US dollars may depreciate. In addition, although Trump's policies are beneficial to the crypto market, they may also trigger new trade risks and further increase market uncertainty.
5. Where are the future opportunities?
Despite the current market volatility, Bitcoin's long-term potential remains strong. With more and more institutions joining in and the gradual clarification of crypto industry regulations, the future of the market is full of opportunities.
For investors, this adjustment period may actually be a good time to observe and gradually enter the market. If the Fed's expectations for rate cuts continue to decrease in 2025, the market may gradually stabilize and investors will have more opportunities.
VI. Conclusion
In general, although the current market has fluctuated due to the hawkish remarks of the Federal Reserve, from the perspective of Bitcoin's fundamentals, this adjustment is likely to be just a normal fluctuation in the bull market. For investors who are optimistic about the long-term potential of Bitcoin, the current market decline may be a buying opportunity worthy of attention. Be patient and analyze rationally, and future opportunities are still worth looking forward to!