This morning, the Federal Reserve announced a 25 basis point cut to the benchmark policy rate, but hinted that the number of rate cuts in 2025 may be lower than previously expected (lower than four cuts predicted in September and lower than the three cuts expected by the market before the meeting). Moreover, Powell described this shift as a 'new phase' of monetary policy and emphasized that after a 100 basis point cut in 2024, rates are now significantly closer to a neutral stance. Such a 'hawkish' signal caused both the US stock and cryptocurrency markets to plunge.
OKX real-time market shows that as of around 10 AM today, BTC fell below $99,000 at its lowest, with a 24-hour decline of 5.38%, dropping below $100,000;
Besides BTC, ETH fell below $3,600 at its lowest, with a 24-hour decline of 6.03%; SOL fell briefly below the $200 mark, with a 24-hour decline of 6.94%;
Other major altcoins also experienced significant declines. Among the top 100 cryptocurrencies by market capitalization, the Meme sector saw the largest drop, with WIF falling below $2.5, a 24-hour decline of 17.6%; FLOKI fell below $0.000185, a 24-hour decline of 17.5%; PEPE fell below $0.000019, a 24-hour decline of 16.3%;
In the US stock market, as of the close of the day, all three major indices fell, with the Dow initially down 2.59%, setting a record for the longest single-day consecutive decline in 50 years (down for the 10th consecutive trading day); the S&P 500 index closed down 2.95%, and the Nasdaq closed down 3.56%;
Affected by the overall market uptrend, the total market capitalization of cryptocurrencies has also sharply declined. CoinGecko data shows that the total market capitalization of cryptocurrencies has fallen below $2.6 trillion, with a 24-hour decline of 8%. The trading enthusiasm of crypto users has also decreased, with Alternative's fear and greed index reporting 75 today, changing from extreme greed to greed.
In derivatives trading, Coinglass data shows that in the past 24 hours, the entire network experienced liquidations totaling $853 million, with long positions liquidated at $752 million and short positions at $101 million. In terms of cryptocurrencies, BTC had liquidations of $157 million and ETH had liquidations of $135 million.
Bitcoin fell below $100,000 for the first time this week, and altcoins are also 'bleeding profusely.' When asked about Bitcoin reserves, Powell stated, 'Currently, it is not allowed to hold Bitcoin and I do not want to change the law.' Is the policy bull market coming to an end, or are there other variable factors before Trump officially takes office?
1. Interest rate cut predictions may not have a long-term impact on the crypto market, as the correlation between Bitcoin and major stock indices has decreased.
Although interest rate cut predictions are currently affecting prices, they may not have a long-term impact, as the correlation between Bitcoin and major stock indices has decreased. A slowdown in interest rate cuts in 2025 is not entirely surprising, but it has put some pressure on risk assets, including cryptocurrencies. While macro factors traditionally influence cryptocurrency price trends, industry-specific factors may dominate in the coming weeks and months, especially with market expectations that Trump will make policy changes.
2. Compared to the S&P 500 index, Bitcoin's decline is not as large as normal fluctuations.
Although the short-term price reaction of BTC is disappointing, the correlation between Bitcoin and many altcoins with the stock market has slightly weakened this month. During a bull market, when cryptocurrencies have little or no correlation with stocks, they tend to thrive. Considering BTC temporarily remains above $100,000, and the decline compared to the S&P 500 index is not as large as normal fluctuations, once the dust settles in the next 24 to 48 hours, this can actually be interpreted as a strong signal.
3. Tightening liquidity and a strong dollar are the biggest risks facing BTC.
The biggest trouble for the Federal Reserve right now is that despite interest rate cuts, the financial environment is still tightening. Since September, long-term bond yields and mortgage rates have been rising, and the dollar has appreciated, which also indicates a tightening financial environment. The continuous appreciation of the dollar also poses macro risks for Bitcoin, as the dollar's strength is related to the contraction of global money supply, which is often detrimental to Bitcoin and other crypto assets; in fact, the Federal Reserve's net liquidity continues to decrease. In my view, tightening liquidity and a strong dollar are also the biggest risks facing BTC... On the other hand, BTC's on-chain factors remain very favorable, especially the continued decline in exchange balances, which supports the hypothesis that BTC's supply gap continues to widen.
4. It is expected that the Federal Reserve's dovish stance will weaken in 2025.
Global markets expect the Federal Reserve's dovish stance to weaken in 2025. Therefore, crypto event traders and market makers are lowering their risks.” The Federal Reserve officials cut the benchmark interest rate for the third consecutive time on Wednesday but controlled the expected number of rate cuts for 2025. Lower interest rates usually increase demand for most high-risk assets (such as cryptocurrencies).
In summary, although the Federal Reserve signaled 'hawkish' intentions, market expectations for Bitcoin have begun to diverge, especially as general bullish sentiment waned before breaking through the $100,000 level. I see some analysts expressing pessimism, believing Bitcoin will soon fall below $60,000, but personally, I think the probability of falling below $90,000 this month is low. The market often behaves this way; when prices rise, various potential positive news and analyses based on it will appear in front of everyone's eyes. Conversely, when prices fall, various media will immediately create negative news to match market sentiment.
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