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Bitcoin Drop Over 5% Following Federal Reserve's Rate Cut Announcement

Bitcoin saw sharp declines following the Federal Reserve's announcement of a rate cut on Dec. 18, 2024. Bitcoin dropped to $99,196, down nearly 6% within 24 hours, after reaching a new all-time high above $108,000 earlier in the week. .

The Federal Reserve cut interest rates by 25 basis points, bringing the benchmark to a range of 4.25%-4.50%. Despite the cut, Fed Chairman Jerome Powell's comments signaled a slower pace for future rate reductions. He noted that the rate cuts in 2025 would likely be smaller due to higher inflation expectations and previous inflationary pressures. Powell’s remarks led to a cautious mood across financial markets, with Bitcoin and other cryptocurrencies seeing immediate price drops.

Over $690 million in crypto derivatives positions were liquidated following the Fed's announcement. Bitcoin long positions accounted for a significant portion of the total liquidations. This also caused major disruptions in the broader cryptocurrency market, with altcoins like Ethereum, Cardano and Litecoin all experiencing losses of around 10%.

Powell's statements included the Federal Reserve's expectation that the rate would decline to 3.9% by the end of 2025, which was lower than previous projections. He indicated that the slower pace of rate cuts was due to a stronger-than-expected economy and persistent inflation. The U.S. stock market also reacted negatively to Powell's comments, with both the S&P 500 and Nasdaq 100 falling. Cryptocurrency-related stocks like Coinbase and MicroStrategy also saw notable losses.$BTC