Emily Walker
After the Federal Open Market Committee (FOMC) gathered on December 18, there has been a slight decline in global stock market indices. In contrast, Bitcoin (BTC) has remained resilient, trading steadily around the mid-$90,000 range as of this writing.
Bitcoin Remains Stable Amid Slowing Rate Cut Speculations
Since September, following more than a year of increasing interest rates, the US Federal Reserve (Fed) started to cut rates, lowering them by 50 basis points. This adjustment led to optimism in both the cryptocurrency and stock markets, which surged in expectation of a more lenient monetary policy that would benefit riskier investments.
However, a report from K33 Research indicates that the recent FOMC meeting has raised doubts about regular rate cuts moving forward. Fed chair Jerome Powell signaled that the pace of monetary easing might slow down in 2025. This cautious approach is influenced by potential inflationary risks related to the Trump administration.
Consequently, the S&P 500 index, which tracks 500 of the largest companies listed in the US, has seen a 2.55% decline over the last month. Despite this fall in stock prices, Bitcoin has demonstrated strength, reinforcing its position as a growing asset class.
Vetle Lunde, the Head of Research at K33 Research, commented that the recent FOMC meeting has triggered the current decline. He mentioned:
In the two weeks following the FOMC meeting, there has been a global shift away from risk, leading to Bitcoin experiencing an 11% decline, while Ether has dropped by 15%, with the ETH/BTC ratio falling to approximately 0.036.
While an 11% decrease in Bitcoin’s value is notable, it is relatively small compared to its historical fluctuations. During bull markets, it’s common for Bitcoin to experience declines of 20% to 30%, while altcoins often see even bigger dips before making a recovery.
Lunde also observed that Bitcoin’s correlation with the Nasdaq has risen above 0.5 for the first time since September, indicating that Bitcoin is increasingly following the trends of traditional technology-driven stock markets.
Market Anticipates Inflation Amid Trump’s Leadership
Even with the Fed having lowered interest rates by 100 basis points since September, there are concerns about ongoing inflation, highlighted by the 100-basis-point increase in 10-year Treasury yields.
The recent drop in Bitcoin’s value aligns with crypto entrepreneur Arthur Hayes’ prediction that BTC could face a significant downturn around Trump’s inauguration. In addition, on-chain analysis suggests that Bitcoin might see a sharp correction down to $80,000.
Nonetheless, many experts in the industry believe that Bitcoin’s long-term positive outlook remains strong. As of now, BTC is priced at $94,805, reflecting an increase of 2.6% over the last 24 hours.