This morning, the Fed announced a 25 basis point cut in the benchmark policy rate but hinted that the number of rate cuts in 2025 might be lower than previously expected (fewer than the four cuts predicted in September, and fewer than the three cuts expected before the meeting). Furthermore, Powell described this shift as a 'new phase' of monetary policy, emphasizing that after a 100 basis point cut in 2024, rates are now clearly much closer to a neutral stance. Such 'hawkish' signals caused both the US stock market and the cryptocurrency market to plunge.
OKX real-time market shows that as of around 10 AM today, BTC fell below 99,000 USD at its lowest, with a 24-hour decline of 5.38%, dropping below 100,000 USD;
Aside from BTC, ETH fell below 3,600 USD at its lowest, with a 24-hour decline of 6.03%; SOL briefly fell below the 200 USD mark, with a 24-hour decline of 6.94%;
Other mainstream altcoins also experienced significant declines. Among the top 100 coins by market cap, the Meme sector had the largest drop, with WIF falling below 2.5 USD, a 24-hour decline of 17.6%; FLOKI fell below 0.000185 USD, a 24-hour decline of 17.5%; PEPE fell below 0.000019 USD, a 24-hour decline of 16.3%;
As for US stocks, as of the day's close, all three major stock indices fell, with the Dow initially down 2.59%, setting the record for the longest single-day consecutive decline in 50 years (falling for the 10th consecutive trading day); the S&P 500 index closed down 2.95%, and the Nasdaq closed down 3.56%;
Due to the overall market rise, the total market cap of cryptocurrencies has also rapidly declined. CoinGecko data shows that the total crypto market cap has fallen below 2.6 trillion USD, with an 8% decline in 24 hours. The trading enthusiasm among crypto users has also declined, with Alternative's fear and greed index today reporting 75, shifting from extreme greed to greed.
In terms of derivatives trading, Coinglass data shows that in the past 24 hours, the total liquidation across the network was 853 million USD, with liquidations of long positions at 752 million USD and liquidations of short positions at 101 million USD. In terms of coin types, BTC had liquidations of 157 million USD and ETH had liquidations of 135 million USD.
Bitcoin fell below 100,000 USD for the first time this week, and altcoins are also 'bleeding', and when asked about Bitcoin reserves, Powell stated, 'Currently, it is not allowed to hold Bitcoin and does not wish to change the law.' Is the policy bull market coming to an end, or are there other variable factors before Trump officially takes office?
1. Interest rate cut predictions may not have a long-term impact on the crypto market, as the correlation between Bitcoin and major stock indices has decreased.
Although the interest rate cut predictions are currently affecting prices, it may not have a long-term impact, as the correlation between Bitcoin and major stock indices has decreased. The expected slowdown in interest rate cuts in 2025 is not entirely surprising, but it has put some pressure on risk assets, including cryptocurrencies. While macro factors traditionally affect cryptocurrency price trends, industry-specific factors may dominate in the coming weeks and months, especially in the context of market expectations that Trump will implement policy changes.
2. Compared to the S&P 500 index, Bitcoin's decline is not as large as normal fluctuations.
Although BTC's short-term price reaction is disappointing, the correlation between Bitcoin and many altcoins with the stock market has slightly weakened this month. During bull markets, when cryptocurrencies have little or no correlation with stocks, they tend to flourish. Considering that BTC is temporarily holding above 100,000 USD, and compared to the S&P 500 index, its decline is not as large as normal fluctuations, therefore, once the dust settles in the next 24 to 48 hours, this can actually be interpreted as a strong signal.
3. Tightening liquidity and a strong dollar are the biggest risks BTC faces.
The biggest trouble for the Fed right now is that despite cutting interest rates, the financial environment is still tightening. Since September, long-term bond yields and mortgage rates have been rising, and the dollar has appreciated, which also means the financial environment is tightening. The continuous appreciation of the dollar also brings macro risks to Bitcoin because the dollar's appreciation is related to the global money supply contraction, which is often detrimental to Bitcoin and other crypto assets. In fact, the Fed's net liquidity continues to decrease. In my view, the tightening of liquidity and the strengthening of the dollar are also the biggest risks BTC faces... On the other hand, BTC's on-chain factors continue to be very favorable, especially with the continuous decline in exchange balances, supporting the hypothesis that BTC supply gaps continue to worsen.
4. It is expected that the Fed's dovish stance in 2025 will weaken.
The global market expects the Fed's dovish stance to weaken in 2025. Therefore, crypto event traders and market makers are reducing risks. The Fed officials cut the benchmark rate for the third consecutive time on Wednesday but controlled the expected number of rate cuts for 2025. Lower rates typically increase demand for most high-risk assets (such as cryptocurrencies).
In summary, although the Fed has released 'hawkish' signals, market expectations for Bitcoin have started to diverge, especially as the overall bullish sentiment before breaking the 100,000 USD mark has weakened. I see some analysts expressing pessimism, believing that Bitcoin will soon fall below 60,000 USD, but personally, I think the chances of falling below 90,000 this month are low. The market is often like this; when prices rise, all kinds of potential positive news and various analyses based on this will be concentrated in front of people. And when prices fall, various media immediately create various negative news to accompany market sentiment.
Just this morning, I saw a rather interesting picture on Twitter, and I’ll share it directly with everyone here, let’s have some fun with it.
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