Following the Federal Open Market Committee (FOMC) meeting on December 18, global equity market indices have seen a slight decline. However, Bitcoin (BTC) remains stable, trading in the mid-$90,000 range at the time of writing.
Bitcoin stable amid speculation of slow interest rate cuts
After more than a year of consecutive interest rate hikes, the US Federal Reserve (Fed) began cutting rates in September, reducing rates by 50 basis points. This sparked optimism across both crypto and equity markets, which increased in anticipation of an accommodative monetary policy favorable to risk assets.
However, according to one report According to K33 Research, the December 18 FOMC meeting has cast some doubt on a regular rate cut, as Fed Chairman Jerome Powell has hinted at a slower pace of monetary easing into 2025. The Fed’s decision to move slowly with interest rate cuts is largely due to potential inflationary pressures associated with Trump’s presidency.
As a result, the S&P 500 – a stock market index that tracks the performance of the 500 largest companies listed in the US – has fallen 2.55% in the past month. Despite this decline in equities, Bitcoin has shown resilience, reflecting its status as an emerging asset class.
Commenting on the development, Vettel Lunde, Head of Research at K33 Research, said the December 18 FOMC meeting is the catalyst for the recent slowdown. Lunde said:
Global risk appetite has eased over the past two weeks following the FOMC, and Bitcoin has suffered a negative two-week return of 11%, while Ether has declined 15%, sending ETH/BTC down to 0.036. Is.
Although the 11% drop in Bitcoin’s price is significant, it is relatively minor in the context of Bitcoin’s historical performance. During bullish periods, declines of 20% to 30% are common for leading cryptocurrencies, with altcoins often experiencing even sharper declines before rebounding.
Lunde also noted that Bitcoin’s 30-day correlation with the Nasdaq has climbed above 0.5 for the first time since September. This increased correlation suggests that Bitcoin is increasingly mirroring the movements of traditional tech-heavy equity markets.
Market braces for inflation under Trump
Despite the Fed cutting interest rates by 100 basis points since September, markets remain cautious about persistent inflation. This concern is evidenced by the 100-basis-point increase in 10-year Treasury yields.
Crypto entrepreneur Arthur Hayes is emboldened by the recent decline in BTC price forecast An “annoying dump” could be seen in major cryptocurrencies around Trump’s inauguration. Furthermore, on-chain analysis suggestion of BTC may face a sharp correction to $80,000.
That said, many industry experts maintain Bitcoin’s long-term bullish outlook remains intact. At press time, BTC is trading at $94,805, up 2.6% in the last 24 hours.
Featured image from Unsplash.com, chart from tradingview.com
