Early this morning, the Federal Reserve announced a 25 basis point rate cut. Although the market had anticipated this, the decision still triggered significant declines in U.S. stocks, gold, and the cryptocurrency market. The Dow Jones index fell by 2.58%, marking its 10th consecutive trading day of decline, the longest streak since 1974; the S&P 500 index dropped 2.95%, while the Nasdaq index plummeted 3.56%. The S&P 500's drop was the largest on a Federal Reserve rate decision day since 2001. Gold prices plummeted by $60 that day.
In the cryptocurrency market, Bitcoin once fell below the critical support level of $99,000, with an intraday drop of 5%. Other altcoins and meme coins saw even larger declines, and the total market capitalization of the cryptocurrency market fell below $3.5 trillion, down 7.2% overall.
Powell's speech raises market concerns
Federal Reserve Chairman Powell clearly stated after the FOMC meeting: "The Federal Reserve cannot hold Bitcoin. This is something Congress needs to consider, and we do not intend to change the current laws." This statement intensified the market's selling sentiment towards Bitcoin, causing it to drop nearly $8,000 in the past two days.
Is the U.S. stock market in the "largest bubble in history"?
Famous investor and author of the book (Ultimate Swing Trading Guide) Steve Burns warns that the U.S. stock market may be in "the largest bubble in history." He stated: "The Federal Reserve is afraid of an economic recession and will not tighten monetary policy, but the real risk lies in malignant inflation or the devaluation of the dollar."
Burns stated that if the market experiences a 50% correction or crash, he would increase his holdings in gold and silver ETFs to hedge against dollar risk. He also has positive views on several companies, including Palantir, Reddit, Nvidia, and Rocket Lab USA, believing that the stock charts of these companies are "outstanding."
Burns emphasized: "No matter what trading system you use, position management is always the most important. The size of your position determines whether you can make money, keep your profits, or even avoid significant losses."
Future Trends of Bitcoin
Trump will officially take office on January 20, 2025, and his policy regarding the establishment of a Bitcoin national reserve remains unclear. The volatility in the U.S. stock market may exacerbate fluctuations in the Bitcoin market.
Community Views
FalconX Research Director: Rate cuts have limited impact on the crypto market, Bitcoin's correlation with the stock market declines
David Lawant, the research director at cryptocurrency brokerage FalconX, believes that while rate cuts temporarily suppress cryptocurrency prices, the long-term impact may not be significant. He stated: "Although macroeconomic factors traditionally affect cryptocurrency prices, certain specific events within the industry may dominate the market in the coming weeks or even months, especially in the context of market expectations that the new government will change policies."
Pantera Capital Executive Partner: Clear signals of Bitcoin's bottom, optimistic outlook
Tony Sycamore, a market analyst at IG Australia Pty, pointed out that although the Federal Reserve's decision was surprising, it was not entirely unexpected for those monitoring inflation and economic data. "The Fed's decision became a catalyst for market correction, clearing speculative funds that flooded into risk assets like stocks and Bitcoin after the election."
Since the election on November 5, the price of Bitcoin has risen by 50% and reached a historic high of $108,316 earlier this week. Paul Veradittakit, an executive partner at Pantera Capital, stated: "All signs indicate that Bitcoin has bottomed out, and the future outlook is optimistic." Even though some traders chose to take profits due to disappointment with the Federal Reserve's decisions, the long-term potential of Bitcoin remains promising.
"New Debt King" Gundlach: Gold and Bitcoin positions will increase, but may remain range-bound in the short term.
"New Debt King" Gundlach expects that investment positions in gold and Bitcoin may continue to increase, but prices might remain range-bound in the short term. He added: "I won't hold Bitcoin until the new government is officially in office."
