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bitcoin price saw a significant drop on Wednesday, briefly falling below the $100,000 milestone on the US Federal Reserve's (Fed) cautious outlook on interest rate cuts stopped investments in cryptocurrencies.
At one point during Wednesday's trading session, the market-leading cryptocurrency fell to $98,760 before recovering to the six-figure mark. Other cryptocurrencies, including ethereum (eth) and Dogecoin (DOGE), also faced substantial pullbacks.
Fed's cautious rate cut creates uncertainty in markets
He <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-12-19/bitcoin–btc-tests-100-000-after-fed-spurs-worst-drop-since-september?utm_content=crypto&utm_campaign=socialflow-organic&utm_medium=social&utm_source=twitter” target=”_blank” rel=”nofollow”>The Federal Reserve's decision The move to reduce borrowing costs for the third consecutive time came with a dovish forecast for future reductions, particularly through 2025. Chairman Jerome Powell stressed that more progress on inflation is needed before the central bank can consider further flexibility of monetary policy.
Tony Sycamore, market analyst at IG Australia Pty, said the Federal Reserve's decision was largely anticipated given recent trends in US inflation and economic activity.
However, it acted as a catalyst to get rid of some of the “speculative excess” that had entered risk assets, including stocks and bitcoin, especially after the recent US elections, according to Sycamore.
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Despite this drop, the price of bitcoin is still up approximately 50% since the US election on November 5, largely due to President-elect Donald Trump's commitment to deregulate the cryptocurrency sector as the idea of establishing a national bitcoin reserve is floated, further boosting market sentiment.
Paul Veradittakit, Managing Partner at Pantera Capital, expressed optimism about the future of bitcoin price, stating: “All signs point to a good bottom and outlook for bitcoin,” even as some traders took profits after the Federal Reserve meeting. .
Market dynamics changed after the Fed meeting, with Sean McNulty, chief operating officer at liquidity provider Arbelos Markets, reporting a surge in demand for options to protect against potential bitcoin declines.
Zann Kwan, chief investment officer at Revo Digital Family Office, indicated that a temporary pullback to the low $90,000s is possible for bitcoin.
bitcoin Price Targets Key Resistance Level of $105,400
crypto analyst Ali Martínez provided insight into market sentiment and emphasized that current market behavior reflects expectations about future conditions rather than past events.
the analyst <a target="_blank" href="https://x.com/ali_charts/status/1869520970832138261″ target=”_blank” rel=”nofollow”>noted that while the 25 basis point rate cut was largely anticipated, the Fed's updated outlook for 2025 was not well received. Instead of three rate cuts expected in 2025, the Federal Reserve now projects just two, raising concerns about persistent inflation.
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Recent inflation data has also been discouraging, with core consumer price index (CPI) figures annualizing at 4% and core personal consumption expenditures (PCE) approaching 3.5%. The producer price index (PPI) figures are also on an upward trend, suggesting that inflation could remain a constant challenge.
However, Martinez emphasizes that the real turning point came during Powell's press conference when he described the decision as a “closer call,” indicating that not all Fed officials agreed on the cuts. This caused the US dollar to soar to levels not seen since 2022, which typically correlates with btc declines.
Martinez too <a target="_blank" href="https://x.com/ali_charts/status/1869473939065647518″ target=”_blank” rel=”nofollow”>revealed that bitcoin price had broken out of a head and shoulders pattern on Wednesday, resulting in it falling just below $99,000, but emphasized that the cryptocurrency must break above $105,400 to nullify any bearish outlook.
At the time of writing, the price of bitcoin stands at $101,180, down 2.2% in the last 24 hours.
Featured image of DALL-E, chart from TradingView.com
