After the Federal Open Market Committee (FOMC) meeting on December 18, global stock market indices saw a slight decline. However, Bitcoin (BTC) has remained steady, trading in the mid-$90,000 range at the time of writing.
Bitcoin is flat amid speculation of slower interest rate cuts
After more than a year of successive interest rate hikes, the US Federal Reserve began cutting interest rates in September, cutting interest rates by 50 basis points. This sparked optimism in both cryptocurrency and stock markets, which rose in anticipation of dovish monetary policy favorable to riskier assets.
However, according to A a report By K33 Research The December 18 Federal Open Market Committee meeting cast some doubt on regular interest rate cuts, with Fed Chair Jerome Powell hinting at a slowing pace of monetary easing in 2025. The Fed’s decision to slow down on interest rate cuts is due to… Largely due to potential inflationary pressures associated with a Trump presidency.
As a result, the Standard & Poor’s 500 – a stock market index that tracks the performance of 500 of the largest listed companies in the United States – fell by 2.55% over the past month. Despite this decline in stocks, Bitcoin has shown resilience, reflecting its status as an emerging asset class.
Commenting on this development, Vitel Lundy, Head of Research at K33 Research, said that the FOMC meeting on December 18 is the catalyst for the latest downturn. Lundy added:
The past two weeks after the FOMC meeting have been met with a global risk reduction, with Bitcoin facing negative two-week returns of 11%, while Ether fell by 15%, pushing ETH/BTC lower towards 0.036.
While an 11% drop in Bitcoin’s price is significant, it is relatively modest in the context of Bitcoin’s historical performance. During bull periods, pullbacks of 20% to 30% are common for leading cryptocurrencies, with altcoins often experiencing steeper declines before rebounding.
Lundy also noted that Bitcoin’s 30-day correlation with the Nasdaq rose above 0.5 for the first time since September. This increasing correlation indicates that Bitcoin is increasingly mirroring the movements of traditional, highly technical stock markets.
The market is preparing for inflation under Trump
Although the Federal Reserve has cut interest rates by 100 basis points since September, markets remain cautious about continued inflation. This concern is evident in the 100 basis point rise in 10-year Treasury yields.
The recent drop in BTC prices is buoying crypto entrepreneur Arthur Hayes Climate prediction The major cryptocurrency could see a “horrible dump” ahead of Trump’s inauguration. Moreover, on-chain analysis suggests That BTC may face a sharp correction to $80,000.
However, many industry experts maintains The long-term bullish outlook for Bitcoin remains intact. At press time, Bitcoin is trading at $94,805, up 2.6% over the past 24 hours.
Featured image from Unsplash.com, chart from TradingView.com