This article is available in Spanish.
The broader crypto market saw a pronounced downturn after yesterday’s Federal Open Market Committee (FOMC) meeting, held on December 18. After the US Federal Reserve implemented an interest rate cut of 25 basis points as expected, it also signaled fewer cuts in 2025 than previously expected.
In response, the Bitcoin price fell by more than 5%, falling below $100,000 before showing slight signs of recovery. Altcoins saw double-digit declines across the board.
The Federal Reserve’s decision, which met expectations for a 25 basis point cut, marked a notable shift in the projected interest rate trajectory for next year. Instead of the previously announced four cuts, the central bank now expects only two, indicating a more cautious attitude. This recalibration of future monetary policy sent ripples across the risk asset spectrum, causing the S&P 500 to fall 3% and the Russell 2000 Small Cap Index to fall 4.4%.
Has the crypto bull been run over?
Within the crypto sector, the immediate aftermath was clear. Matt Hougan, Chief Investment Officer at Bitwise Asset Management, addressed market conditions this morning via X, writing: “The big catalyst today was the Fed announcement […] The Fed cut rates by 25 basis points as expected, but lowered expectations for next year from four to two cuts. Higher interest rates are bad for risky assets, and the Fed’s announcement caused a sharp decline in all risky assets.”
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According to Hougan, Bitcoin’s price action reflected an increased sensitivity to changing monetary conditions. He noted that Bitcoin’s price decline was exaggerated as leveraged positions were liquidated. “$600 million of leveraged long positions were blown away in today’s market, exacerbating the pullback.”
Despite the steep correction, Hougan argued that the broader outlook remains constructive: “Crypto has internal momentum now, and nothing about today’s announcement interrupts the megatrends: the pro-crypto reversal in Washington policy, increasing institutional adoption and ETF flows, Bitcoin purchases by governments and corporations, and major technological breakthroughs in the programmable blockchain space.”
He pointed to technical indicators as supporting his thesis: “My favorite momentum gauge is still positive: Bitcoin’s 10-day exponential moving average ($102,000) is still above the 20-day exponential moving average ($99,000).”
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Hougan concluded his argument by stating that the shift in Fed expectations would not derail the longer-term bull run, stating: “Crypto is in a multi-year bull market. An expected interest rate cut of 50 basis points will not change that.”
Other market observers offered similar interpretations of the Fed’s communications strategy. Warren Pies, founder of 3Fourteen Research, commented via .”
Renowned macro analysts echoed this sentiment. Crypto analyst and podcaster Fejau (@fejau_inc) described the central bank’s approach as a strategy designed to steer market expectations: “The Fed forced itself into cuts this week and is therefore using an aggressive FFR dotplot forecast before 2025 to talk down long-term bond yields, despite today’s cuts. […] Welcome to macro-psyop warfare. Smoke and mirrors, baby.”
He characterized the dot plots as a tool for psychological influence rather than as a strict road map: “It is important to see the dot plots not as a future prediction of events, but as a psychological tool. […] The Fed has bought itself time to allow further data to emerge before actually taking action […] I can almost guarantee that 2025 will not happen as predicted in detail.”
Andreas Steno Larsen, CIO of Steno Global Macro Fund and CEO at Steno Research, offered a similar assessment: “By significantly raising all forecasts, the Fed is significantly lowering the bar for cuts next year. It is a wise move if you want to make further cuts, but do not want to commit in advance.”
At the time of writing, Bitcoin was trading at $101,766.
Featured image created with DALL.E, chart from TradingView.com
Credit : www.newsbtc.com
