Deng Tong, Golden Finance

At 3 a.m., the Federal Reserve announced its interest rate decision and summary of economic expectations, and then Fed Chairman Powell held a monetary press conference at 3:30 a.m. Although altcoins have rebounded after the previous three FOMC meetings, the market is still falling after the Federal Reserve officially announced a 25 basis point interest rate cut.

What caused this round of crypto market decline? What is the future trend of the Federal Reserve? What do people in the industry think of the current market conditions?

1. Risk-avoiding mode after the high point

According to Coingecko data, the price of BTC reached a historical high of $108,135 on December 17.

Subsequently, on December 18, the price of Bitcoin once erased an increase of about 5% to $103,765. Bitcoin's decline triggered panic selling among crypto investors, sending cryptocurrencies down across the board.

Large-scale liquidation in the derivatives market has accompanied the downturn in the crypto market. US$78.09 million in BTC was liquidated, US$55.65 million in ETH was liquidated, and the crypto market was full of blood.

Total amount of cryptocurrency liquidations. Source: CoinGlass

The dominance of long liquidations suggests that the crypto market is over-leveraged on the bullish side, primarily due to profit-taking and risk-off mode ahead of today’s Fed rate cut decision.

Prior to this FOMC meeting, sellers had already dominated the market, and seller pressure reflected the typical risk aversion before the event, with BTC cooling off.

In addition, the continued correction in the crypto market also reflects the weakness of the U.S. stock market. On December 17, the S&P 500 index fell 0.4% to close at 6050.61 points, and the Nasdaq Composite Index fell 64 points. The Dow Jones index fell for the ninth consecutive trading day, its longest losing streak since 1978. It closed down 0.61% on December 17 at 43,339 points.

U.S. stock market 24-hour performance data source: Financial Visualizations

Before the FOMC meeting, market participants have Focus on the Federal Reserve's decision to cut interest rates. The Federal Reserve's last interest rate decision in 2024 is a complex and highly volatile event.

2. Cut interest rates by 25 basis points, but Powell made hawkish remarks

This morning, the Federal Reserve’s 2024 annual interest rate resolution came to an end. The bank decided to lower the benchmark interest rate by 25 basis points to a range of 4.25%-4.50%. It was the third consecutive rate cut, in line with expectations. In eight resolutions this year, the Fed has cut interest rates by a total of 100 basis points, each of which was a 50 basis point cut.interest rates, two 25 basis point interest rate cuts, and five other interest rate changes.

According to the median value of the Fed’s December dot plot, the Fed expects to cut interest rates twice in 2025, by 25 basis points each time. In September, it is expected to cut interest rates four times, by 25 basis points each time; the Fed expects 2026 Interest rates will be cut twice this year, by 25 basis points each time, in line with expectations in September. The median forecast for the federal funds rate at the end of 2025 is 3.9%. The previous forecast for September was 3.4%.

Powell’s announcement that the Federal Reserve will only cut interest rates twice more in 2025 is undoubtedly a hawkish statement for the market. In addition, the Federal Reserve Board also lowered its inflation expectations for 2025. Increased from 2.1% to 2.5%.

Some analysts believe that this is because Trump’s taking office will bring about some adjustments, such as increasing tariffs on many countries, deporting millions of undocumented workers, and expanding fiscal deficits. Powell emphasized at the press conference that the Fed's readjustment is a signal that the central bank is prepared to adjust according to the needs of the U.S. economy.

Powell also said that geopolitical instability remains a risk. There is great uncertainty in economic forecasts for the next three years.

In this regard, Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, said: The Fed has sent a signal that they will not be as dovish as they have been in the past, and they tend to cut interest rates less next year. I think this is A signal that the market will continue to price in less than two rate cuts, possibly heading towards zero cuts if the data is strong enough. If the Fed doesn't see inflation falling enough, they won't be willing to keep cutting rates.

"Fed spokesperson" Nick Timiraos pointed out: The Fed's statement added the wording "magnitude and timing", implying that it will slow down the pace of interest rate cuts to revise potential adjustments.

Swan Bitcoin managing director John Haar said: The move to finally lower interest rates and hint at fewer rate cuts next year indicates that future interest rates will be relatively hawkish.

Affected by the Fed's hawkish remarks, U.S. interest rate futures priced the Fed to cut interest rates by about 49 basis points in 2025, which is close to the 50 basis points predicted by the Fed's dot plot. Before the interest rate decision was announced, the market priced an interest rate cut of 75 basis points. basis points.

Not only is it expected to cut interest rates, but also on the question of whether Trump will establish a Bitcoin reserve, Powell also made it clear that the Federal Reserve has no intention of holding Bitcoin. "We are not allowed to hold Bitcoin," Powell said at a press conference after the FOMC meeting. As for the legal issues of holding Bitcoin, Powell said, "It is something for Congress to consider, but we have no intention of seeking to Change the law.”

3. What do industry insiders think of the current crypto market?

Regarding short-term predictions for Bitcoin prices, cryptocurrency analyst Skew said that BTC’s decline “both ways” clears theExcept for "positions" as longs were stopped out and "shorts took profits".

Placeholder partner Chris Burniske posted on There's not much of an advantage. Use this experience as an opportunity to slow down and don't overtrade, and you'll be fine in the long run."

Andre, Head of European Research at Bitwise Dragosch noted: "I think the biggest trouble for the Fed right now is that despite the Fed's interest rate cuts, financial conditions remain tight. Since September, long-term bond yields and mortgage rates have been rising, and the dollar has appreciated, which also means financial conditions Tightening. Continued appreciation of the U.S. dollar also poses macro risks to Bitcoin, as the appreciation of the U.S. dollar is also associated with a contraction of the global money supply, which tends to be detrimental to Bitcoin and other crypto assets. In fact, the Fed's net liquidity continues to decrease. It appears that tighter liquidity and a stronger US dollar are also bullish for BTC The biggest risk... On the other hand, BTC’s on-chain factors continue to be very favorable, especially the continued decline in exchange balances, which supports the assumption that the BTC supply gap continues to intensify.”

According to Coinglass data. It shows that in the past 24 hours, the liquidation amount of the entire network reached 120 million U.S. dollars, of which the liquidation amount of long orders was approximately 109 million U.S. dollars, and the liquidation amount of short orders was approximately 11.0841 million U.S. dollars.

As of press time, the price of BTC fell below US$100,000 to US$99,422.12, a 24-hour drop of 5.8%.

The price of Ethereum fell below the $3,600 mark to $3,594.01, a 24-hour drop of 7.3%.

Data sources: CoinTelegraph, CoinDesk, X, Coingecko, Golden Ten Data, Golden Finance