WASHINGTON (dpa-AFX) - Crypto market sentiment remains tethered to the not-so-dovish monetary policy outlook unveiled by the Federal Reserve on Wednesday. Alongside the widely expected reduction of 25 basis points in interest rates, the Fed indicated that rate cuts in 2025 would be lower than earlier projections. Hints from the Fed Chief that the Federal Reserve cannot hold Bitcoin due to legal restrictions also dampened crypto market sentiment.
Shocked by the Fed's hawkish tone, overall crypto market capitalization dropped to $3.46 trillion before recovering to its current level of $3.53 trillion. Bitcoin dropped to a low of $98,792.67 before rebounding to its current level of $102,391.38.
The Federal Reserve, in its last meeting of the year reiterated that the risks to achieving its twin goals of maximum employment and inflation at the rate of 2 percent over the longer run are roughly in balance. In support of its goals, the Committee lowered the target range for the federal funds rate by quarter percentage point to 4.25 to 4.5 percent. The monetary policy action however was not unanimous and Beth M. Hammack, President and chief executive officer of the Federal Reserve Bank of Cleveland preferred to maintain the target range for the federal funds rate at 4.5 to 4.75 percent and voted against the action.
In the Summary of Economic Projections released simultaneously, the Fed expects real GDP growth to record 2.5 percent in 2024 and 2.1 percent in 2025, higher than the 2 percent it had projected in September. The median unemployment rate is seen lower at 4.2 percent in 2024 and 4.3 percent in 2025 as compared with the Fed's projection of 4.4 percent made in September.
While the Fed had in September projected PCE inflation in 2024 at 2.3 percent, it now projects the same at 2.4 percent. Likewise, the PCE inflation in 2025 is seen jumping to 2.5 percent as compared with Fed's previous projection of 2.1 percent. The core component of the PCE inflation which was previously expected at 2.6 percent in 2024 has now been revised higher to 2.8 percent. The projection for 2025 which was at 2.2 percent has also been raised to 2.5 percent.
Taking cognizance of the resilience of the U.S. economy as evidenced by the higher GDP projection and the stalled disinflationary process as revealed by the higher inflation projections, the Fed has projected the median Federal funds rates at levels higher than it projected in September. The median federal funds rate which is at 4.4 percent currently is seen falling only to 3.9 percent in 2025. In September, the Fed had projected it to fall to 3.4 percent. Likewise, the median federal funds rate is expected to be 3.4 percent in 2026 versus 2.9 percent anticipated by the Fed while drawing up the Summary of Economic Projections in September. The Fed's projection for 2027 has also been lifted to 3.1 percent from 2.9 percent made in September.
With the Fed signalling only two quarter point rate cuts in 2025 versus four it had projected previously, the Dollar rallied, lifting the 6-currency Dollar Index to a two-year high of 108.27 on Wednesday. It is currently at 108.04.
The Fed's slower rate cut path, Powell's comments on Bitcoin Reserve, the Dollar's strength and the massive spike in bond yields that followed, has dampened crypto market sentiment. More than 90 percent of the top 100 cryptocurrencies are trading in the overnight red zone. Only less than 10 percent of the top 100 cryptocurrencies are holding on to gains on a weekly basis.
However, the Fed-led turmoil has not eroded the gains made by cryptos ever since Donald Trump won the Presidential elections in the U.S. and surprised markets with several crypto-friendly pronouncements. Over the 30-day horizon, close to 75 percent of the top 100 cryptocurrencies are sitting on gains in excess of a percent. Despite the Fed's hawkish outlook for 2025, for crypto world, 2024 has indeed been bountiful and only less than 25 percent of the top 100 cryptocurrencies are trading with losses on a year-to-date basis.
Bitcoin has slipped 1.6 percent overnight to trade at $102,391.38, around 5 percent below the all-time high of $108,268.45 recorded on December 17. In contrast, spot gold (XAU/USD) is currently trading at $2,594.40 per troy ounce, around 7 percent below the all-time high of $2,790.41 recorded on October 31, 2024.
BTC has gained 1.5 percent in the past week, 11.7 percent over the past 30 days and more than 142 percent till date in 2024.
According to data from Farside Investors, Bitcoin Spot ETF products in the U.S. received inflows of $275 million on Wednesday. The funds had recorded inflows of $494 million on Tuesday.
Ethereum lost 4.4 percent in the past 24 hours to trade at $3,681.14, around 25 percent below the previous peak recorded in November 2021. Weekly losses are at 6.8 percent whereas gains in 2024 are a little more than 61 percent. Ether traded between $3,900.38 and $3,541.38 in the past 24 hours.
Ether Spot ETF products in the U.S. saw inflows plunging to $3 million on Wednesday from $145 million on Tuesday.
XRP (XRP) slipped to the 4th rank overall with a decline of 4.5 percent overnight. The cryptocurrency is currently trading at $2.39, around 34 percent below the all-time high recorded in January 2018.
BNB (BNB) rose to the 5th rank overall despite an overnight decline of 1.6 percent. At its current trading price of $702.04, BNB is trading 12 percent below the all-time high recorded 15 days ago.
6th ranked Solana (SOL) dropped 2.8 percent overnight, dragging weekly losses to 9.1 percent. SOL is currently trading at $209.70, around 21 percent below its record high touched in November 2024.
7th ranked Dogecoin (DOGE) dropped 5.1 percent overnight and 11.7 percent in the past week to trade at $0.3641. DOGE is trading 51 percent below the all-time high touched in May 2021.
9th ranked Cardano (ADA) lost 5.8 percent overnight to trade at $0.9692. ADA is currently trading 69 percent below the record high touched in September 2021. 10th ranked TRON (TRX) also declined 2.4 percent overnight to trade at $0.2655. TROX has slipped 11.4 percent in the past week. The trading price is 40 percent below the cryptocurrency's all-time high touched 16 days ago.
67th ranked Movement (MOVE) topped overnight gains with a surge of 16.8 percent. 26th ranked Bitget Token (BGB), the utility token of Seychelles-based Bitget cryptocurrency exchange recorded overnight gains of 4.6 percent.
68th ranked Lido DAO (LDO), 65th ranked FLOKI(FLOKI), 61st ranked THORChain (RUNE) and 48th ranked Cosmos (ATOM) topped overnight losses with declines of more than 12 percent.
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