Bitcoin took a notable hit on Wednesday, briefly dipping below the $100,000 threshold amidst growing caution over interest rates from the U.S. Federal Reserve. This news sent ripples through the crypto landscape, affecting leading digital currencies like Ethereum and Dogecoin, which also saw significant declines.
The Federal Reserve has trimmed borrowing costs for the third time but expressed a cautious stance on future reductions, particularly looking ahead to 2025. Fed Chair Jerome Powell noted that more progress against inflation is needed before they can consider further easing monetary policy.
Tony Sycamore, a market analyst with IG Australia Pty, highlighted that the Fed’s decision was expected due to current trends in U.S. inflation and economic activity. However, it acted as a trigger to shed some of the speculative excess, especially in risk assets such as stocks and Bitcoin, accelerated by recent U.S. elections, he added.
Despite this setback, Bitcoin’s value remains robust, having climbed roughly 50% since the U.S. elections on November 5. This surge can be partly attributed to President-elect Donald Trump’s pro-cryptocurrency stance, including his idea of establishing a national Bitcoin reserve. Paul Veradittakit from Pantera Capital maintains a positive outlook for Bitcoin, suggesting that the fundamentals indicate a strong floor, even as some traders took profits post-Fed meeting.
Following the Fed meeting, shifts were noticeable in the market. Sean McNulty of Arbelos Markets reported increased interest in options to hedge against potential declines in Bitcoin. Zann Kwan, from Revo Digital Family Office, suggested a brief pullback into the lower $90,000s could occur.
Focusing on Bitcoin’s trajectory, analyst Ali Martinez explained that current market behaviors are based more on expectations than past events. The anticipated 25 basis point rate cut was expected, yet the Fed’s outlook for 2025, predicting only two cuts rather than three, was not well-received due to ongoing inflation concerns. Fresh inflation data has not been promising, with various indicators suggesting that inflation might continue to pose challenges.
Martinez highlighted a turning point during Powell’s press discussion, where the term “closer call” signaled dissent among Fed officials, leading to a surge in the U.S. dollar, often a bearish signal for Bitcoin. Martinez also mentioned that Bitcoin broke out of a head-and-shoulders pattern, dipping momentarily below $99,000, yet emphasized that Bitcoin must exceed $105,400 to shake off a bearish sentiment.
Currently, Bitcoin is valued at $101,180, marking a 2.2% drop over the last day. The cryptocurrency market remains dynamic, and its stakeholders are closely watching these developments.
