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The broader cryptocurrency market saw a clear decline following yesterday’s Federal Open Market Committee (FOMC) meeting, which was held on December 18. After the US Federal Reserve cut interest rates by 25 basis points as expected, it also signaled smaller cuts in 2025 than previously expected.
In response, the price of Bitcoin fell more than 5%, falling below the $100,000 level before showing slight signs of recovery. Altcoins saw overall declines of double digits.
The Fed’s decision – despite meeting expectations for a 25 basis point cut – came with a notable shift in the expected interest rate path for next year. Instead of the four cuts previously announced, the central bank now expects only two cuts, indicating a more cautious stance. This recalibration of forward monetary policy sent ripples across the entire spectrum of risk assets, pushing the S&P 500 down 3% and the Russell 2000 small-cap index down 4.4%.
Is the crypto bull over?
In the cryptocurrency sector, the immediate consequences are clear. Matt Hogan, chief investment officer at Bitwise Asset Management Directed Market conditions this morning via Rising interest rates are bad for risk assets, and the Fed’s announcement caused a sharp decline in all risk assets.
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According to Hogan, Bitcoin’s price action reflects increasing sensitivity to changing monetary conditions. He noted that the decline in Bitcoin prices was exaggerated due to the liquidation of leveraged positions. “$600 million worth of leveraged long positions were blown out of the market today, exacerbating the decline.”
Despite the sharp correction, Hogan argued that the broader outlook remains constructive: “Cryptocurrencies now have internal momentum, and nothing in today’s announcement interrupts the megatrends: the pro-crypto reversal in Washington politics, increasing institutional adoption and ETF flows, and Bitcoin purchases.” By governments and companies, and major technical breakthroughs in the field of programmable blockchain.”
He pointed to technical indicators as a supporting factor for his thesis: “My favorite momentum metric remains positive: Bitcoin’s 10-day EMA ($102K) remains above its 20-day EMA ($99K).”
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Hogan concluded by emphasizing that the shift in the Fed’s outlook would not derail the long-term uptrend, saying: “Cryptocurrencies are in a multi-year bull market. 50 basis points of expected interest rate cuts won’t change that.”
Other market watchers offered similar explanations for the Fed’s communication strategy. Warren Bice, founder of 3Fourteen Research, Comment Via
Renowned macroeconomic analysts have echoed this sentiment. Cryptocurrency analyst and podcast host Fejau (@fejau_inc) described the central bank’s approach as a strategy designed to guide market expectations: “The Fed forced itself to cut this week, so it’s using a hawkish 2025 FFR forecast to talk up long bond yields despite today’s cut ( …) Welcome to total psychological warfare. Smoke and mirrors, baby.”
He described the dot charts as a tool for psychological influence rather than a strict road map: “It is important to look at the dot charts not as future predictions of events, but as a psychological tool (…) The Fed has bought itself time to allow more data to be released before they make their move.” Virtually (…) you can almost guarantee that 2025 will not happen as predicted in their points.
Andreas Steno Larsen, CIO of Steno Global Macro Fund and CEO of Steno Research, I offered Similar assessment: “By raising all expectations so much, the Fed is meaningfully lowering the bar for cuts next year. It’s a wise move, if you want more cuts, but don’t want to pre-commit.”
At press time, Bitcoin was trading at $101,766.
Featured image created with DALL.E, a chart from TradingView.com