TL;DR
- The crypto market experienced a significant downturn following the Federal Reserve’s recent hawkish stance on monetary policy, leading to substantial declines in Bitcoin and major altcoins.
- Bitcoin fell below the crucial $100,000 mark, trading as low as $98,900 before recovering slightly, while major altcoins like Ethereum, Dogecoin, XRP, ADA, and Solana saw significant declines.
- Despite the current turbulence, some market analysts remain optimistic about the future of cryptocurrencies, suggesting that the recent correction might be an overreaction and that Bitcoin could recover post-Christmas.
The crypto market experienced a significant downturn following the Federal Reserve’s recent hawkish stance on monetary policy. The Fed’s decision to cut interest rates by 25 basis points, coupled with a cautious outlook for future rate cuts, has sent shockwaves through the digital asset market. Bitcoin, along with major altcoins, has seen substantial declines, leading to widespread liquidations and investor concerns.
Bitcoin’s Decline
Bitcoin, the leading cryptocurrency, fell below the crucial $100,000 mark, trading as low as $98,900 before recovering slightly above $100,000. At the time of writing, despite dropping nearly 3%, BTC trades at around $102.000.
This decline was triggered by the Fed’s announcement, which projected only two rate cuts in 2025, down from the previously anticipated four cuts. The hawkish tone adopted by Fed Chair Jerome Powell has led to a reassessment of market expectations, causing a sell-off in both the stock and crypto markets.
Altcoins Suffer Massive Losses
The impact of the Fed’s announcement was felt even more acutely in the altcoin market. Major altcoins such as Ethereum (ETH), Dogecoin (DOGE), XRP, ADA, and Solana (SOL) experienced significant declines. ETH shed nearly 5%, DOGE, XRP, and ADA lost more than 6%, and Solana dropped 3.6%.
The broader market saw over $860 million in liquidations, highlighting the extent of the sell-off. Analysts suggest that this sharp pullback could offer buying opportunities if it proves to be an overreaction.
Crypto Market Reactions and Future Outlook
Despite the current turbulence, some market analysts remain optimistic about the future of cryptocurrencies. Popular economist Alex Kruger noted that the recent correction might be an overreaction and that Bitcoin could recover post-Christmas.
He highlighted that euphoria and leverage have been largely flushed out from the crypto market, which should minimize the downside risks. Additionally, blockchain analytics platform Santiment reported that Bitcoin showed greater relative strength compared to the drop in the S&P 500, indicating potential resilience once the dust settles.
