Bitcoin experienced a remarkable decline on Wednesday, momentarily dipping below the $100,000 mark. This downturn occurred as the U.S. Federal Reserve’s cautious stance on interest rate cuts cast a shadow over cryptocurrency investments. During the trading session, Bitcoin fell to $98,760 before rebounding to its six-figure status. Major cryptocurrencies like Ethereum (ETH) and Dogecoin (DOGE) also witnessed significant price retracements.
Federal Reserve’s Cautious Rate Cut Sparks Uncertainty
The Federal Reserve’s recent decision to reduce borrowing costs for the third time in a row was accompanied by a cautious outlook for future rate cuts, especially looking ahead to 2025. Jerome Powell, the Fed Chair, emphasized the need for further progress on inflation control before any additional easing of monetary policy could be considered.
According to Tony Sycamore, a market analyst at IG Australia Pty, this decision was anticipated due to prevailing trends in U.S. inflation and economic activity. However, it triggered a shedding of “speculative excess” in risk assets like stocks and Bitcoin, particularly in the aftermath of the recent U.S. elections.
Bitcoin Maintains Upward Momentum Since U.S. Elections
Despite the recent decline, Bitcoin’s price remains approximately 50% higher since the U.S. elections on November 5. This surge is largely attributed to President-elect Donald Trump’s commitment to deregulating the cryptocurrency sector and his proposal to establish a national Bitcoin stockpile, which has further buoyed market sentiment.
Paul Veradittakit, managing partner at Pantera Capital, expressed a positive outlook for Bitcoin’s future, noting, “All signs point to a good floor and outlook for Bitcoin,” even amidst profit-taking by some traders following the Fed meeting. The market dynamics shifted post-Fed meeting, with Sean McNulty, director of trading at liquidity provider Arbelos Markets, observing an increase in demand for options to hedge against potential Bitcoin declines.
Bitcoin Price Targets Resistance Level At $105,400
Crypto analyst Ali Martinez offered insights into market sentiment, highlighting that current market behavior reflects expectations about the future rather than past events. Martinez noted that while the 25 basis point rate cut was expected, the Fed’s updated outlook for 2025 was not well received. Instead of the anticipated three rate cuts in 2025, the Fed now projects only two, raising concerns about persistent inflation.
Recent inflation data has been concerning, with core consumer price index (CPI) figures annualizing at 4% and core personal consumption expenditures (PCE) nearing 3.5%. Producer price index (PPI) figures are also trending upward, indicating that inflation may remain a persistent challenge.
Martinez underscored that the pivotal moment came during Powell’s press conference when he described the decision as a “closer call,” indicating a lack of consensus among Fed officials regarding the cuts. This announcement led to the U.S. dollar surging to levels not seen since 2022, which typically correlates with Bitcoin price declines.
Furthermore, Martinez revealed that Bitcoin had broken out of a head-and-shoulders pattern on Wednesday, causing its drop just below $99,000. However, he emphasized that to counter any bearish outlook, Bitcoin must surpass the critical resistance level of $105,400.
At the time of writing, Bitcoin is valued at $101,180, marking a 2.2% decline over the past 24 hours.
