December 19, 202406:11 UTC
The cryptocurrency market has seen a massive downturn, with over $850 million wiped out in liquidations. This event came after the Federal Reserve announced a 25 basis point cut in its benchmark policy rate.
Although markets had expected a modest rate cut, Federal Reserve Chairman Jerome Powell's signals of a conservative approach to future rate adjustments in 2025 sparked market uncertainty and widespread selling.
Bitcoin Drop Causes Nearly 300,000 Cryptocurrency Traders to Liquidate
During a press conference, Powell noted that while inflation was declining “steadily,” its decline was “slower than hoped.” As a result, the Fed revised its 2025 inflation forecast to 2.5%, signaling the potential for tightening economic conditions that could constrain liquidity in financial markets, including cryptocurrencies.
“Inflation has made progress toward the Committee’s 2 percent goal but remains moderately elevated. The economic outlook is uncertain, and the Committee is monitoring risks to both aspects of its dual mandate,” the Fed said in a press release.
This shift in monetary policy has led to a sharp decline in Bitcoin, which has fallen below $99,000—down more than 8% from its all-time high of $108,000. Similarly, the broader cryptocurrency market, including major coins like Ethereum (ETHUSD), has suffered significant losses.
According to Coinglass, the past 24 hours saw a staggering $869.39 million wiped out through liquidations, with $749.59 million coming from long positions and $119.80 million from short positions. Notably, altcoins bore the brunt of the impact, accounting for over $222 million in liquidated assets.
Amidst these market movements, a total of 299,335 traders were caught off guard. The largest single liquidation occurred on Binance, involving a $7 million Ethereum trade.
Despite these setbacks, sentiment among crypto traders remains surprisingly resilient. The crypto Fear and Greed Index is currently at 75, reflecting a strong bullish outlook amid market volatility. This sentiment highlights the continued appeal of crypto as an investment, even in turbulent times.
This optimism has been reinforced by significant inflows into bitcoin-linked investment vehicles. BlackRock’s iShares Bitcoin Trust, for example, reported $359.6 million in new investments on Wednesday alone. Meanwhile, the total inflow of all spot bitcoin ETFs was $275.3 million.
These developments—both a dovish Federal Reserve and a bullish crypto market—reflect a complex interplay between macroeconomic policy and crypto markets. Investors appear to be hedging against economic uncertainty by increasing their holdings in digital assets, which, despite their inherent volatility, are a viable strategy for portfolio diversification.
Recent market activity highlights the impact of U.S. monetary policy on the cryptocurrency sector. As the Federal Reserve continues to navigate inflationary challenges, the cryptocurrency market’s response remains swift and clear.
