The price of crypto and other equities plunged sharply on Wednesday, as investors tried to predict the outlook for next year following an hawkish shift by the U.S. Central Bank.
The Federal Reserve’s 25-basis point rate cut on Wednesday had been widely priced, but concerns arose when the bank indicated that interest rates might not be falling anytime soon.
When a Press conferenceFed Chair Jerome Powell has told journalists that the Fed is concerned about inflation. “steadily” Recent high readings indicate that it has been receding “slower than hoped.”
The Fed's updated “dot plot” for 2025 has signaled a shift in policy expectations, with officials now projecting two rate cuts—equivalent to 50 basis points—over the next 12 months, down from the three cuts outlined in the previous forecast.
“Inflation has made progress toward the Committee's 2% objective but remains somewhat elevated,” The Fed has said that the Fed will be introducing a new currency in 2019. Statement.
Bitcoin fell 5% to just above $100,000 following Powell’s comments, while the Nasdaq slid 3.6%, the Dow tumbled 2.6%, and the S&P 500 declined nearly 3%.
The rise in risk assets this year has been attributed to an improving economy and the efforts of central banks to reduce inflation.
What does all this mean to crypto?
Ryan McMillin is the chief investment officer of crypto fund manager Merkle Tree Capital. He says that traders can expect 20% corrections in a bullish market and should be prepared for them.
“I don’t see any reason to think this bull market has run its course just yet,” McMillin was told Decrypt. “This looks much more like a dip worth buying.”
He said that the market had been moving higher over the last week and was consolidating at elevated levels. This indicates a positive acceptance of new prices as they stabilize ahead of potential future gains.
"This is a short-term puke due to FOMC meeting more hawkish than expected," Pratik Kala is the head of research for Apollo Crypto. "Expect higher next week, same time from today."
Many others tend to concur.
“I get the hawkish reaction. I don’t buy the narrative that this is the Fed dot plot that ends the bull run,” Pav Hundal told us that Swyftx’s lead analyst, Pav Hundal. Decrypt.
Economists say that President-elect Donald Trump’s tariffs for boosting domestic industrial production next year could cause short-term volatility on the market and increase inflationary pressures.
Hundal says that the Fed is not likely to be influenced by the policy discussion in deciding whether to reduce rates even further, or to hold them at the current level.
“It doesn’t even matter if the tariff talk is all bluster; it’s a clear signal that Trump will do whatever it takes to stimulate economic growth, and that is good for risk assets,” “He said”
It comes as several tailwinds continue to converge ahead of Trump's inauguration on January 20.
Trump pledged to establish a Bitcoin reserves, protect the crypto-mining interests of the U.S., and become the leader in cryptocurrency. "crypto capital" The world.
He's also proposed formulating specific crypto policies that would provide what many in the industry have long been asking for.
"There is just too much behind this trade, in our opinion, right now," Jonathan de Wet told the audience that he is chief investment officers at Zerocap and the company’s crypto-investment firm. Decrypt.
Then he pointed at a "supportive U.S. regulatory environment," a strong US economy, and MicroStrategy's entry into the Nasdaq 100 last week, which all but "opens the door for passive capital" Allocation via exchange-traded index funds
Editor's note: Adds additional analyst comments