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- Crypto Plunge: Bitcoin, XRP, and Dogecoin Drop After Fed’s Rate Cut
- Market Shock: Bitcoin, XRP, and Dogecoin Slide as Fed Slows Rate Cuts
- Fed’s Rate Cut Sends Crypto Tumbling: Bitcoin, Dogecoin, XRP Hit Hard
- Crypto Markets React: Bitcoin Dips Under $100K After Fed’s Rate Adjustment
Cryptos Tumble as Federal Reserve Rate Cut Sparks Sell-Off
Bitcoin, XRP, and Dogecoin took significant hits following the Federal Reserve’s announcement of a rate cut on December 18, 2024. Bitcoin dropped by nearly 6%, falling to $99,196 within 24 hours after peaking above $108,000 earlier in the week. XRP and Dogecoin were also affected, seeing declines of 13% and 12%, respectively. Dogecoin reached its lowest point in a month, hitting $0.348.
The Fed’s decision to cut interest rates by 25 basis points, setting the benchmark range to 4.25%-4.50%, initially sparked hopes of relief for the broader market. However, Fed Chairman Jerome Powell’s remarks signaled a slower pace for future cuts, causing uncertainty among investors. Powell explained that future rate reductions in 2025 would be smaller than expected due to persistent inflation pressures. These comments sent waves of caution through financial markets, leading to sharp declines in both traditional assets and cryptocurrencies.
Crypto Market Sees Heavy Liquidations
Following the Fed’s announcement, the crypto market experienced a significant sell-off. Over $690 million in crypto derivatives positions were liquidated, with Bitcoin long positions accounting for a large portion. The broader cryptocurrency market was not spared, as major altcoins like Ethereum, Cardano, and Litecoin also saw losses of around 10%.
The sudden price swings underscored the sensitivity of cryptocurrencies to macroeconomic news. Bitcoin, often touted as a hedge against inflation, reacted swiftly to the Fed’s cautious stance, illustrating the growing influence of traditional financial trends on the crypto market. Although lower interest rates generally favor risk assets, Powell’s statements dampened investor enthusiasm, leading to widespread sell-offs.
Fed’s Slow Approach to Rate Cuts Weighs on Markets
In his comments, Powell noted that the Federal Reserve expects interest rates to decline to 3.9% by the end of 2025, a lower projection than previously anticipated. He attributed the slower pace of cuts to a stronger-than-expected economy and ongoing inflation concerns. As a result, both the U.S. stock market and cryptocurrency markets faced declines. The S&P 500 and Nasdaq 100 saw losses, and stocks related to cryptocurrency, like Coinbase and MicroStrategy, were particularly hard-hit.
This market reaction highlights the increasingly intertwined relationship between decentralized digital assets and traditional economic indicators. Bitcoin, which often moves independently of the stock market, has shown heightened sensitivity to global macroeconomic trends, blurring the line between the crypto market and conventional financial systems.
Bitcoin’s Role in the Global Economy
Despite Bitcoin’s price drop, Powell emphasized in an interview that Bitcoin is not a competitor to the U.S. dollar but rather to gold. He dismissed any notion that the Federal Reserve would hold Bitcoin as a reserve asset, clarifying that U.S. law prohibits the central bank from owning cryptocurrencies, and there are no plans to change that regulation.
The broader crypto market mirrored Bitcoin’s decline, with assets like Ethereum, Solana, and Dogecoin suffering sharp losses. Investor sentiment shifted rapidly as Powell’s cautious outlook dampened enthusiasm for riskier assets, leading to a wave of liquidations and price drops across the board.
Looking Ahead: Crypto Market Adjusts to Macroeconomic Shifts
The Federal Reserve’s measured approach to rate cuts suggests a prolonged period of uncertainty for both traditional and cryptocurrency markets. While Bitcoin and other digital assets have historically been seen as alternatives to traditional investments, their increased responsiveness to global economic news signals a new phase in the evolution of the crypto market.
As the Fed continues to navigate inflation and economic growth, cryptocurrencies will likely remain volatile, driven by both regulatory developments and broader economic trends. Investors will need to closely monitor the intersection of digital assets and traditional financial markets, as the lines between these once-distinct sectors continue to blur.
