The cryptocurrency market experienced a sharp downturn following the United States Federal Reserve’s 25-basis point interest rate cut, causing Bitcoin to fall from its all-time high of $108,267 to a low of $95,000 in just 36 hours. This sudden drop sparked panic among inexperienced traders, leading them to sell off their assets quickly, while seasoned investors saw this as an opportunity to increase their portfolios at a discounted price.
The Federal Reserve’s rate cut, which marks the third such reduction this year, had initially been expected to benefit risk assets like Bitcoin. However, comments from Federal Reserve Chair Jerome Powell dampened market sentiment. Powell suggested that the central bank may pause further rate reductions, citing the latest Consumer Price Index (CPI) data. This has introduced a sense of caution, as many traders remain unsure of how future Fed policy will impact the cryptocurrency market.
Crypto analysts are predicting increased volatility in the short term, with Bitcoin’s price now closely monitoring key support levels around the $100,000 mark. Resistance is expected at $110,000, with some traders hoping for a “Santa Rally” — a term used to describe Bitcoin’s bullish performance during the holiday season. Historical data from previous halving years shows that Bitcoin has surged during this time, with price increases ranging from 11% to 25% in 2017, 2020, and 2024. However, analysts warn that the current market conditions, including global economic uncertainty and the Federal Reserve’s cautious stance, could limit any potential gains.
In addition to the market’s response to the Fed’s decisions, Powell’s remarks on the Central Bank’s restrictions regarding Bitcoin have further complicated the landscape. Powell stated that the U.S. Federal Reserve is not permitted to hold Bitcoin unless approved by Congress. This statement casts doubt on the potential establishment of a U.S. Bitcoin strategic reserve — a key part of former President Donald Trump’s campaign proposal. Trump had expressed plans to set up a reserve to solidify the U.S.’s dominance in the global cryptocurrency market. Powell’s comments now raise significant questions about the feasibility of such a plan, as any attempt to hold Bitcoin would require Congressional approval.
As Bitcoin’s price hovers around $95,430, down 6.2% in the last 24 hours and 12% below its all-time high, traders remain cautious. Many are hoping for stability in the market, but with the Fed’s uncertainty and ongoing macroeconomic factors, Bitcoin’s short-term future remains volatile. Whether the anticipated Santa Rally materializes, or the market faces further declines, will depend largely on how global financial policies and investor sentiment evolve in the coming weeks.
