The broader crypto market experienced a sharp decline following yesterday’s Federal Open Market Committee (FOMC) meeting on December 18. It also signaled a smaller rate cut in 2025, after the US Federal Reserve cut rates by 25-basis-points as forecast. is expected
In response, the price of bitcoin fell more than 5%, falling below the $100,000 mark before showing modest signs of recovery. Altcoins saw double-digit percentage declines.
The Federal Reserve’s decision—while meeting expectations of a 25-basis-point cut—came with a significant shift in the projected rate trajectory for next year. Instead of the four cuts previously communicated, the central bank now expects only two, signaling a more cautious stance. This repositioning of future monetary policy sent ripples across the risk asset spectrum, prompting the S&P 500 to drop 3% and the Russell 2000 Small Cap Index to drop 4.4%.
Is the Crypto Bull Running?
Within the crypto sector, the immediate aftermath was announced. Matt Haugen, Chief Investment Officer of Bitwise Asset Management, addressed to Market conditions by X this morning, writing: “The big catalyst today was the Fed announcement […] The Fed cut rates by 25 basis points as expected, but lowered expectations for next year to 2 cuts from 4 cuts. Higher rates are bad for risk assets, and the Fed’s announcement the reason A sharp pullback across all risk assets.”
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According to Haugen, Bitcoin’s price action shows high sensitivity to changing currency conditions. He noted that Bitcoin’s price decline was exacerbated by the elimination of leveraged positions. “$600 million of leveraged long positions were blown in today’s market, adding to the pullback.”
Despite the sharp correction, Haugen argued that the broader outlook remains constructive: “Crypto now has internal momentum, and nothing about today’s announcement disrupts the mega-trends: The Pro-Crypto Reversal in Washington Policy, increasing institutional adoption and ETF flowsBitcoin purchases by governments and corporations, and major technological breakthroughs in the programmable blockchain space.
He pointed to technical indicators as a supporting factor for his thesis: “My favorite momentum gauge is still positive: Bitcoin’s 10-day exponential moving average ($102k) still above its 20-day exponential moving average ($99k ) is above.”
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Haugen concluded his thread by maintaining that a change in Fed expectations will not derail the long-term bull run, stating: “Crypto is in a multi-year bull market. The 50bps of expected rate cuts won’t change that.
Other market observers offered similar interpretations of the Fed’s communication strategy. Warren Pies, founder of 3Fourteen Research, commented By X: “By raising the inflation forecast, lowering the UE rate, and keeping cuts in place, the Fed has actually opened the way for more than 2 cuts in 2025 as data ‘surprises’ to the dovish side. “
Famous macro analysts echo this sentiment. Crypto analyst and podcaster Fejau (@fejau_inc) described the central bank’s approach as a strategy designed to guide market expectations: “The Fed forced itself to cut this week, so today’s cut Although using a hawkish 2025 FFR dot plot forecast to lower long bond yields. […] Welcome to the macro cype war. Smoke and mirrors baby.
He described dot plots as a tool for psychological influence rather than a strict roadmap: “It is important to see dot plots as a psychological tool, not as a prediction of future events. […] The Fed has bought itself time to allow more data to come out before actually taking action […] You can almost guarantee that 2025 will not happen as predicted in their dots.
Andreas Steno Larsen, CIO of Steno Global Macro Fund and CEO of Steno Research. offered A similar assessment: “By greatly raising all forecasts, the Fed lowers the bar for cuts next year. It’s a wise move if you want to cut more, but don’t want to commit in advance.”
At press time, Bitcoin traded at $101,766.
Featured image created with DALL.E, chart from TradingView.com
