Early this morning, the Federal Reserve finalized its annual interest rate decision for 2024. The bank decided to cut the benchmark interest rate by 25 basis points to a range of 4.25%-4.50% , the third consecutive rate cut, which was in line with expectations.
After the previous three FOMC meetings, the crypto market rebounded, but this time Powell's speech triggered a sharp drop in US stocks, Bitcoin and gold. What caused this round of crypto market decline? What will be the future trend of the Fed's policy?
According to the median of the Federal Reserve's December dot plot, the Federal Reserve expects to cut interest rates twice in 2025 , each by 25 basis points, while the expectation in September was four cuts of 25 basis points each ; the median forecast for the federal funds rate at the end of 2025 is 3.9% , compared with 3.4% in September .
Market expectations for a rate cut in 2025 have weakened significantly, the first quarterly forecast since Trump 's victory as president on November 5 , as his campaign promises to cut taxes, raise tariffs and crack down on illegal immigration have brought new uncertainty to the economic outlook, and some analysts believe these promises will lead to inflation . Fed officials now expect inflation to reach 2% in 2027 , later than the previous expectation of 2026 , and even do not rule out the possibility of another rate hike in 2025 , so the market panicked.
Analysts at the Star Ex exchange believe that the recent rise in Bitcoin is due to the continued large-scale purchases by ETF funds and funds represented by MSTR, and the continued decline in exchange balances, resulting in a continued widening of the BTC supply gap.
Despite the Fed's 25 basis point rate cut , 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 a tightening financial environment. The continued appreciation of the dollar will bring macro risks to Bitcoin, because the appreciation of the dollar is also related to the contraction of the global money supply, which is often not conducive to Bitcoin and other crypto assets , and the Fed's net liquidity continues to decrease .
From the perspective of market trading, the dominance of recent long liquidations suggests that the crypto market is overleveraged on the bullish side , sellers have dominated the market before this FOMC meeting, and the seller pressure reflects the typical risk aversion sentiment before the event, BTC cooling down.
In addition, although the Nasdaq index performed strongly, the Dow Jones index fell for the ninth consecutive trading day, the longest period of decline since 1978. To a certain extent, this shows that funds in the U.S. stock market are mainly concentrated in the top few technology companies, and the drive of artificial intelligence has not spread to the entire U.S. stock market, resulting in a large differentiation of funds.
How will the market perform in the future? Analysts at the StarEx exchange believe that with the approach of Christmas in the West and the end of the 2024 fiscal year, the capital market will be relatively dull during this holiday in the past, and the market trading will probably be quiet. In the next few months, Bitcoin may maintain a large range of fluctuations between $ 80,000 and $110,000, just like the fluctuations between $ 50,000 and $70,000 after March , until new events change this trend. The altcoins are still in a bear market, and this is just a rebound. The fundamentals of no ecology, no new funds, and VCs continuously lifting the ban on cashing out have not changed. In addition, the head platforms have launched a large number of altcoins to suck blood, so it is difficult for altcoins to have a trend.
In terms of strategy, it is better to wait for the bottom or leverage liquidation event to occur and then buy the bottom and do short-term trading.
