Fed cuts rates by 25% and sends crypto market tumbling

The crypto market is going through a period of high volatility, marked by a drop in the price of bitcoin, now valued at $100,300. This fall, unexpected by many investors, comes following recent announcements from the American Federal Reserve. Although the reduction in the key rate by 25 basis points seemed in line with expectations, the upward revision of inflation forecasts for 2025, now set at 2.5% compared to 2.1% previously, surprised the markets. In his speech, Jerome Powell, Chairman of the Fed, emphasized that these adjustments reflect a cautious approach to current economic challenges. These decisions sent shockwaves through financial markets, increasing uncertainty and sparking debate over the potential implications for crypto investors.

The Fed surprises the markets: immediate impact on cryptos

The Federal Reserve confirmed a 0.25% reduction in its key rate, a decision widely anticipated by the markets, but the impacts of a further reduction remain to be assessed. However, the economic projections presented by Jerome Powell, Chairman of the Fed, surprised and worried investors. He has declared that “only two additional reductions are planned in 2025”, which deviates from the more optimistic expectations of several financial players. Thus, this increased caution was coupled with an upward revision of inflation forecasts for 2025, now set at 2.5% compared to 2.1% previously.

These announcements had an immediate and marked impact on the main cryptos. Bitcoin fell 4.6%, hitting $100,300, while ether saw a 5.96% decline to settle around $3,600. According to observers, this correction reflects a forced adjustment of investment strategies. The Fed's new guidance has increased uncertainties. This triggered significant liquidations on long positions and intensified volatility, a trait already inherent to the crypto market. Against this backdrop, investors are closely watching critical support zones, notably between $98,000 and $100,000 for bitcoin, as they hope for a possible rebound.

Towards a strategic repositioning: the prospects

The recent market correction has intensified volatility, and pushed crypto experts to reassess the opportunities and challenges it brings. In a December 18 post on the social network X (formerly Twitter), analyst Skew observed that “the decline made it possible to clean out long and short positions, which leaves room for a possible stabilization between $98,000 and $100,000”. This analysis provides information on the strategic importance of this support zone, which could prove crucial for investors looking for signals to indicate a potential rebound or a new phase of consolidation.

Beyond short-term movements, this situation reveals complex interactions between monetary policy decisions and the crypto market. The upward revision of inflation forecasts, combined with the uncertainty surrounding future economic directions, could reinforce the idea that bitcoin remains primarily a speculative asset. This perception contrasts with its often touted role as a store of value. At the same time, Jerome Powell reaffirmed the Fed's commitment to adjusting its policies based on the needs of the US economy. This positioning provokes both hopes of adaptability and fears of prolonged instability, likely to continue to negatively or positively influence the investment climate in the months to come.

Recent market fluctuations highlight the significant sensitivity of bitcoin and other cryptocurrencies to central bank decisions. This dependence highlights the challenges faced by long-term investors, caught between speculative opportunities and increased volatility. As the economic outlook for 2025 begins to become clearer, it becomes essential for the market to integrate these new dynamics. The strategic choices of players will depend on future monetary orientations, but also on the ability of cryptos to prove their resilience in the face of an increasingly uncertain economic environment.