A significant decline was experienced by Bitcoin and other leading cryptocurrencies on Wednesday after the US Federal Reserve announced a 0.5% interest rate cut. Chair Jerome Powell indicated that further cuts would be limited in 2025.
Soon after Powell’s statement, a 5% decrease was noted in Bitcoin in just 24 hours and reached $100,800 from $108,000 which was noted earlier this week. XRP fell by 9% whereas Ethereum also dropped to $3,690 which marked a decrease of 6%.
Interest rate cuts were initiated by The Federal Reserve in September as an ease of inflation was noticed and unemployment began to rise. While investors had anticipated the rate cuts, Powell described the decision as a ‘closer call’ which implied that the central bank has considered maintaining the current rates.
Although, Fed officials had already projected that there will be four rate cuts for 2025 during their meeting in September, however, current forecasts also suggest that only two cuts are expected next year.
According to the Managing Director of Swan Bitcoin, John Haar, this strategy of lowering the rates while signaling some less cuts ahead indicates a more hawkish outlook. FedWatch tool by the CME Group on Tuesday indicated that there is an 81% probability that there could be another 0.25% cut in January. It was added that there are very low chances that there will not be cut at all.
However, odds shifted dramatically after the conference of Jerome Powell, showing that there are high chance of nearly 91% that the Fed would keep rates unchanged in January, while there is only a 9% chance that there will be a quarter-point cut.
The chief global strategist at Principal Asset Management, Seema Shah mentioned, “This was a hesitant decision, It was intended to provide some reassurance to the markets as the Fed prepares for a more hawkish policy stance in 2025.”
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