Introduction
In the early hours of December 19, 2024, the Federal Reserve announced a 25 basis point interest rate cut, bringing the benchmark interest rate to 4.25%-4.5%. While this move was somewhat in line with market expectations, the Fed’s statement that there may be fewer interest rate cuts in 2025 than expected triggered significant volatility in the cryptocurrency market. Bitcoin (BTC) plummeted in just a few hours, nearly breaking the $100,000 mark, while other mainstream cryptocurrencies such as Ethereum (ETH) also experienced drastic price fluctuations. According to the latest data, the total amount of liquidation in the crypto market in the past 24 hours reached as high as $702 million, causing over 250,000 people to face liquidation.
Impact of the Federal Reserve Interest Rate Decision
The Fed’s latest decision revealed their cautious stance on the economy and inflation. Although the interest rate cut inspired the market, Chairman Powell emphasized at the press conference that due to inflation falling slower than expected, there may be only two interest rate cuts in 2025, far below the market’s previous expectation of three. This policy shift led to a collective decline in the U.S. stock market and the cryptocurrency market, with the S&P 500 and Nasdaq indices plummeting by 2.95% and 3.56% respectively. Meanwhile, the price of Bitcoin dropped sharply from a high of $104,800 to around $100,000, with a decrease of up to 4.6%.
Cryptocurrency Market Plunge: Bitcoin and Ethereum Suffer Major Setbacks
The sharp drop in Bitcoin prices was not only a direct response to the Federal Reserve’s interest rate decision but also closely related to Powell’s comments after the meeting. When asked by reporters about Trump’s proposal to “establish a strategic reserve of Bitcoin,” Powell explicitly stated: “The Fed is not allowed to hold Bitcoin,” and pointed out that this is a matter for Congress to consider. This statement raised concerns in the market about the future of Bitcoin policy, especially against the backdrop of the Trump administration’s support for Bitcoin, leading to an instant change in market sentiment. Ethereum (ETH) also did not escape unscathed, with prices falling from $3,907 to $3,617, a decline of up to 6.8%.
This sharp fluctuation led to a surge in liquidation in the crypto market, with Coinglass data showing that the liquidation amount in the past 24 hours reached $702 million, with long liquidation amounts dominating.
Bitcoin BTC & Ethereum ETH Latest Price Trends Today
Currency
Price
24H Change
24H Volume
Market Cap
7-Day Price Trend
BTC
Bitcoin
$101,202.68
-3.34%
$100.96 billion
$1.99 trillion
ETH
Ethereum
$3,665.61
-4.62%
$53.76 billion
$440.27 billion
Federal Reserve Interest Rate Cut’s Far-reaching Impact on the Market
The Fed’s monetary policy changes, especially the reduction in interest rate cuts in 2025, indicate a more cautious future monetary policy. For the cryptocurrency market, especially high-risk assets like Bitcoin, this means increased uncertainty. While interest rate cuts generally stimulate demand for assets like Bitcoin, the Fed’s cautious attitude towards future rate cuts may lead to more capital flight, further affecting market liquidity.
In addition, the appreciation of the US dollar poses macro risks for Bitcoin. With the strengthening of the US dollar, the contraction of global money supply may suppress cryptocurrencies like Bitcoin, increasing market instability. Especially with the tightening of the US financial environment, market sentiment volatility is also intensifying.
Future Trends of Bitcoin: Rebound or Continued Decline?
Despite facing significant downward pressure in the short term, many analysts believe that the current price adjustment is not the end of the bull market. The cryptocurrency analysis platform Santiment states that Bitcoin’s support above $100,000 is quite strong, and if it can stabilize at this level, a rebound may be expected in the future.
Grayscale Research also points out that sovereign wealth funds in Asia and the Middle East may be the driving force behind further price increases in Bitcoin, rather than the US government. Despite Bitcoin’s sharp decline after Powell’s comments, analysts generally believe that this short-term market reaction does not represent a deterioration in Bitcoin’s long-term prospects. On the contrary, the market remains optimistic about Bitcoin’s supply gap and institutional investor interest.
Investor Strategies
For investors, the current market volatility provides an opportunity for short-term low-cost entry. Despite significant market fluctuations, traders and investors should still focus on the long-term trends of Bitcoin and other mainstream cryptocurrencies. Market reactions to policies are often short-term, while the nature and value of decentralized assets like Bitcoin continue to attract more institutional investors.
Meanwhile, as the price of Bitcoin drops to around $100,000, the market may find support at this level. Some analysts believe that the market is undergoing a healthy price consolidation phase, and a rebound may occur in the coming days. If Bitcoin can maintain above $100,000 and gradually rise to the $101,400 range, the market may resume its upward trend.
Conclusion
The latest Federal Reserve interest rate decision has undoubtedly shaken the market, especially for high-risk assets like cryptocurrencies, further exacerbating market volatility due to policy uncertainty. However, as the market gradually digests the impact of interest rate changes, investor interest in assets like Bitcoin remains strong, with significant uncertainty in future trends. During this process, investors should remain cautious, while focusing on long-term market fundamentals, as well as the supply-demand relationship of Bitcoin and institutional investor trends.
