Following the meeting of the Federal Open Market Committee (FOMC) on December 18, the stock market indicators had a slight decline. However, Bitcoin (BTC) is holding firm, trading in the $90,000 range at the time of writing.
Bitcoin Strong Amid Speculation of Slower Interest Rate Cuts
After more than a year of consecutive interest rate hikes, the US Federal Reserve (Fed) began tapering in September, cutting rates by 50 basis points. This sparked optimism in both the crypto and equity markets, which grew in anticipation of an aggressive monetary policy favoring risk assets.
However, according to a report by K33 Research, the FOMC meeting of December 18 caused some doubts about the reduction of the general rate, as the chairman of the Fed, Jerome Powell, stated the slow pace of reducing the money in 2025. pressures related to the Trump presidency.
As a result, the S&P 500 – a stock market index that tracks the performance of the 500 largest US-listed companies – fell 2.55% last month. Despite this pull back from the currency, Bitcoin has shown resilience, reflecting its status as an emerging asset class.
Commenting on this development, Vetle Lunde, Head of Research at K33 Research, said the December 18 FOMC meeting is the cause of the recent rate drop. Lunde added:
The past two weeks following the FOMC met with global risk-taking, and bitcoin faced a two-week negative gain of 11%, while ether fell 15%, pushing ETH/BTC down towards 0.036.
While the 11% drop in Bitcoin price is significant, it is much less in the context of Bitcoin’s historical performance. During a bull run, pullbacks from 20% to 30% are common for leading cryptocurrencies, while altcoins tend to experience even sharper declines before rebounding.
Lunde also noted that Bitcoin’s 30-day correlation with the Nasdaq rose above 0.5 for the first time since September. This high correlation suggests that Bitcoin is increasingly reflecting the movements of 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 continued inflation. This concern is reflected in the 100 basis point increase in the 10 year Treasury yield.
The recent drop in BTC price reinforces crypto entrepreneur Arthur Hayes’ prediction that the flagship cryptocurrency may see a “sad dump” near Trump’s inauguration. In addition, on-chain analysis suggests that BTC may face a sharp correction at $80,000.
That said, many industry experts save that Bitcoin’s long-term vision remains the same. 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