On December 19, 2024, the Federal Reserve System (FRS) lowered its key interest rate by 0.25%, causing significant changes in the cryptocurrency market. The event led to a collapse in prices for major digital assets, including bitcoin and Ethereum, as well as the liquidation of positions worth more than $ 239 million in just a few minutes after the announcement.
The Fed's policy and its rationale
The Fed not only cut the rate by 25 basis points, but also announced its intention to cut it twice more in 2025. Fed Chairman Jerome Powell explained this decision by weakening the rigidity of the regulator's position:
"We think the economy is in really good shape. We think politics is in really good shape."
These statements were accompanied by assurances of caution about future changes, which was perceived as a signal to the potential strengthening of the dollar and a decrease in the attractiveness of alternative assets such as cryptocurrencies.
Dynamics of the cryptocurrency market
The market reaction was swift and large-scale. According to Coinglass, in half an hour after the announcement of the liquidation, it increased from $39.73 million to $239.2 million. The total volume of liquidations in the last day reached $853 million.
The fall of the largest cryptocurrencies:
#Bitcoin (BTC):
The BTC price briefly dropped below $100,000, losing 5%, but then recovered slightly to $101,705. During the day, the decrease was 2.35%.
#Ethereum (ETH):
The value of ETH fell by 0.68% immediately after the Fed statement, and in 24 hours the decrease was 4.5%. The price at the time of publication is $3674.
#Solana (SOL):
SOL decreased by 3.58% per day, and its current price is $208.98.
#XRP :
The price fell by 7% per day, reaching $2.36.
Features of the meme coin segment
Meme coins such as Dogecoin (DOGE) and Pepe (PEPE) have also been hit:
Dogecoin:
#DOGE decreased by 7% immediately after the rate cut and by 19.43% per day, reaching a price of $0.36.
Pepe:
PEPE fell by almost 4% immediately after the announcement, and lost more than 11% in a day.
The total market capitalization of meme coins decreased by 8%, to $105.2 billion, according to CoinMarketCap.
Causes and prospects
The cryptocurrency market has demonstrated its high dependence on macroeconomic policy. The main factors of the fall were:
Strengthening of the US dollar:
The rate cut makes the dollar more attractive to investors, reducing the demand for cryptocurrencies as an alternative asset.
Mass liquidations:
A sharp collapse in prices led to a wave of automated liquidations, increasing pressure on the market.
Expectations of the Fed's future actions:
The hint of further rate cuts creates uncertainty for investors.
What to expect?
Although the short-term prospects of the crypto market remain vague, the current volatility may open up opportunities for long-term investments. Attention to macroeconomic indicators and careful risk management are becoming key for market participants.
Key findings:
The price drop may be temporary, but the Fed's caution hints at a possible continuation of turbulence.
For experienced investors, the current correction may be a favorable moment for choosing promising assets.
The cryptocurrency market continues to adapt to changes in the global economy, confirming its high volatility and dependence on external factors.
