Bitcoin, the leading cryptocurrency, experienced an extremely turbulent 24-hour period, with the price fluctuating between $100,000 and $110,000 as the Federal Reserve’s cautious view on rate reductions dampened the enthusiasm for speculation.
The volatility of Bitcoin highlights the interplay that exists between monetary policies, market sentiments, and Bitcoins’ own fluctuations. This creates an environment both full of opportunity and risks.
The battle for $100,000
In New York the largest digital asset dropped initially by about 1%, to $99 588. It had hit a day-low of $98,760, which was approximately $10,000 below the previous record set earlier this week.
The market briefly recovered the six-figure mark before falling again. This illustrates the delicate balance of bullish momentum against the pressures on the markets.
Other cryptocurrencies were also affected by this volatility, such as Ether, the favorite of memes, Dogecoin. They also struggled with maintaining their upward trajectory.
Fed takes a cautious approach
Markets are uneasy about the Federal Reserve’s announcement that it will lower borrowing rates for the third time in a row, but also signal a slower pace in future rate cuts in 2025.
Fed Chair Jerome Powell stressed that further progress in inflation was needed before loosening the monetary policy. This cooled down speculative interests in riskier investments like Bitcoin.
According to Bloomberg’s Tony Sycamore, IG Australia Pty Market analyst, the Fed’s meeting result shouldn’t surprise investors who have been watching the’recent run of warm US activity and inflation data.’ But it’s served as a catalyst for washing away the speculative exuberance that flowed to risk assets such as stocks and Bitcoin after the US election.
Crosscurrents in the market: US politics and treasury returns, as well as Bitcoin’s growth
The Fed decision sent ripples through the markets. It strengthened the dollar and brought down stocks and bonds around world.
A spat about a funding measure has also added to the market’s nervousness, as it increases the possibility of a partial US shutdown.
US equity futures were also volatile on Thursday, highlighting the general unease among the markets.
Bitcoin is still gaining ground despite the volatility. It has gained nearly half since Donald Trump was elected president of the United States on 5 November. He promised to relax regulations for cryptos and backed the idea of creating an official national Bitcoin stockpile.
Trump embraces cryptocurrency: A tailwind for Bitcoin
Paul Veradittakit is a managing director at Pantera Capital. He says that despite the fact that some traders are disappointed by the Fed’s meeting, they have taken profits.
Trump’s crypto support has overshadowed worries about the stretched momentum of the digital currency and its lack of traditional value metrics.
The current stance of the government is in sharp contrast with that of President Joe Biden, whose administration left office in 2020 and imposed strict regulations on industry after a downturn revealed risky business practices.
Hedging against declines
Sean McNulty reported that after the Fed announced its policy, there was a spike in demand from liquidity providers Arbelos Markets for options designed to protect against Bitcoin price declines.
Zann Kwan is the chief investment officer of the Revo Digital Family Office. According to Bloomberg, a short-term retreat into the $90k range could be possible, given the market’s caution.
The post Bitcoin’s $100,000 test: Fed cautious stance sparks volatility in the market may be updated as new developments unfold.
