Global Markets React Post-FOMC Meeting: Bitcoin Holds Ground
Following the December 18 meeting of the Federal Open Market Committee (FOMC), global equity markets have encountered a mild decline. In contrast, Bitcoin (BTC) has demonstrated stability, trading in the mid-$90,000 range at present.
Bitcoin’s Stability Amid Speculation on Interest Rate Adjustments
After a prolonged period of rising interest rates, the U.S. Federal Reserve commenced rate reductions in September, cutting rates by 50 basis points. This move was welcomed by both crypto and equity markets, which responded positively in hopes of a more accommodating monetary policy that benefits risk-oriented investments.
However, a report from K33 Research indicates that the recent FOMC meeting has raised questions about the consistency of these rate cuts. Federal Reserve Chairman Jerome Powell suggested a more measured pace of monetary easing might be anticipated by 2025 due to potential inflationary pressures during Trump’s presidency. Consequently, the S&P 500, a major index representing 500 leading U.S. companies, has seen a 2.55% decline over the last month. Despite this downturn in equities, Bitcoin has maintained its position, underscoring its growing reputation as a new asset class.
Vetle Lunde, Head of Research at K33 Research, commented on the market shifts, noting, “The December 18 FOMC meeting triggered the recent market downturn.” He further explained that global market participants have been retreating from risky assets, leading Bitcoin to experience a two-week negative return of 11%, while Ethereum (ETH) has fallen by 15%, driving the ETH/BTC ratio towards 0.036.
Though an 11% decrease in Bitcoin’s value is significant, it is relatively minor compared to its historical volatility, where pullbacks of 20% to 30% are not uncommon during bull markets. Altcoins often face even steeper declines before rebounding.
Lunde also pointed out that Bitcoin’s 30-day correlation with the Nasdaq has risen above 0.5 for the first time since September, indicating that Bitcoin is increasingly reflecting the movements of traditional tech-heavy equity markets.
Market Prepares for Inflation Concerns Under Trump
Despite the Federal Reserve’s 100 basis point interest rate reduction since September, markets remain wary of ongoing inflationary pressures. This caution is mirrored by a 100-basis-point increase in 10-year Treasury yields.
The recent dip in Bitcoin’s price supports predictions made by crypto entrepreneur Arthur Hayes, who warned of a potential “harrowing dump” around Trump’s inauguration. Additionally, on-chain data suggests Bitcoin might face a steep correction, possibly dropping to $80,000.
Nonetheless, many industry experts uphold a positive long-term outlook for Bitcoin. Currently, BTC is valued at $94,805, marking a 2.6% increase in the past 24 hours.
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