Bitcoin Price Dips Below $104K Following Fed’s Rate Cut Announcement
Following a 25 basis point rate cut by the Federal Reserve to a range of 4.25%-4.50%, Bitcoin’s price fell below $104,000. The Fed’s projections suggest a slower pace of rate cuts in the future, raising concerns among investors about tightening financial conditions. Despite these challenges, favorable on-chain factors for Bitcoin persist amidst rising dollar strength.
Bitcoin’s price dipped below $104,000 shortly after the Federal Reserve announced a 25 basis point rate cut to a range of 4.25%-4.50%. This reduction marks the third consecutive cut of the year, contributing to a total decrease of 100 basis points since September. Despite earlier expectations of this move, the market reacted negatively due to the Fed’s hawkish stance, projecting fewer rate cuts than previously anticipated.
The updated economic forecasts shown in the Fed’s dot plot suggest a decline of the Fed funds rate to 3.9% by the end of 2025, which is higher than the September prediction of 3.4%. With solid economic growth and persistent inflation indicated in recent data, investors focused on clues from the Fed about potential future monetary policy. Bitcoin’s price has struggled amid tightening financial conditions, as increasing long bond yields and an appreciating dollar have fueled concerns about the overall market.
Andre Dragosch, European Head of Research at Bitwise, emphasized that financial conditions appear to have tightened despite the rate cuts, warning that a strengthening US dollar may adversely impact Bitcoin and other cryptocurrencies. Nonetheless, he also noted that on-chain factors for Bitcoin remain favorable, particularly the ongoing reduction in exchange balances that suggests an intensifying Bitcoin supply deficit. The chairman of the Federal Reserve, Jerome Powell, is scheduled to address the press at 2:30 pm ET for further insights into the U.S. central bank’s policies.
The Federal Reserve’s monetary policy decisions significantly influence various financial markets, including cryptocurrencies like Bitcoin. As central banks adjust interest rates to manage economic growth and inflation, the response from asset markets can vary widely. The recent cut in rates by the Fed, while intended to stimulate economic activity, has raised concerns about the overall tightening of financial conditions, impacting investor sentiment in both traditional and digital currencies.
In summary, the Federal Reserve’s decision to cut interest rates has not provided the anticipated support for Bitcoin, resulting in a price drop below $104,000. Market participants are now evaluating the implications of the Fed’s updated economic projections and Chairman Powell’s forthcoming remarks. While macroeconomic conditions remain challenging due to a strong dollar and tightening liquidity, the underlying supply dynamics for Bitcoin paint a more positive picture.
Original Source: www.coindesk.com
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