At the latest Federal Reserve policy meeting last night, the benchmark policy rate was lowered by 25 basis points to a range of 4.25%-4.5%. While this result was in line with market expectations, the hawkish rhetoric in the statement and the adjustment of economic forecasts had a profound impact on market sentiment, leading to a significant pullback in the Altcoin market. Prices of Bit, ETH, Dogecoin, and Solana, among other mainstream and Altcoins, have declined significantly.
The Federal Reserve sends hawkish signals, triggering market turmoil
Federal Reserve Chairman Jerome Powell clearly stated at the press conference that although this rate cut was in line with market expectations, the frequency and magnitude of future rate cuts may be much lower than previously assumed by the market. Powell emphasized that the Federal Reserve only plans to cut rates twice in 2025, and also raised its inflation forecast for 2025 from the previous 2.1% to 2.5%. This adjustment reflects the Federal Reserve's deep concern about future inflationary pressures.
Powell specifically mentioned the uncertainty of future economic policies, including the protectionist policies that may be implemented by the incoming Trump administration, such as imposing tariffs on imported goods, large-scale deportation of undocumented workers, and the potential expansion of fiscal deficits, as important reasons for the Federal Reserve to maintain a more cautious stance. These potential policy changes may further exacerbate inflationary pressures and have a broad impact on the market.
Bit leads the decline, the Altcoin market is under pressure
The Bit price quickly fell 5.6% to $100,000 after the Federal Reserve announced the rate cut, but has since rebounded somewhat.
ETH fell more sharply, down 6.96% to $3,600. Altcoins like Dogecoin and Solana were also not spared, with Solana falling more than 7% and Dogecoin, due to its high volatility, falling more than 8%. The broader Altcoin market performed even more poorly, with some second- and third-tier assets falling more than 10%.
According to Coinglass data, in the last 24 hours, a total of 236,199 people were liquidated globally, with a total liquidation value of $672 million. The largest single liquidation occurred on Binance - ETHUSD_PERP, worth $4.0677 million.
Crypto analyst Skew pointed out that the rapid decline in Bit has cleared the market of long and short positions, indicating that the market has entered a deep correction period. Bit price briefly fell to the key bidding zone of $100,000 to $98,000, and analysts believe that if it fails to reclaim the support of $100,000 to $101,400 by the daily close, the market may continue to search for a new bottom.
Economic forecasts highlight inflation risks, dot plot shows policy determination
The economic forecasts presented at this meeting clearly demonstrate the Federal Reserve's policy considerations. The Federal Reserve has raised its economic growth forecasts for 2024 and 2025, while lowering its unemployment rate forecast, and significantly raising its inflation forecast. Particularly noteworthy is the large upward revision of the 2025 inflation forecast, indicating the Federal Reserve's high degree of concern about long-term inflation risks.
The dot plot shows that the Federal Reserve may only cut rates twice in 2024. This cautious policy stance not only demonstrates its firm determination to control inflation, but also leads the market to re-evaluate the future liquidity environment. The US dollar and the volatility index (VIX) rose sharply on this signal, while US bond yields, US stocks, gold, and the Altcoin market generally came under pressure.
Short-term outlook: the Altcoin market faces continued adjustment
Against this macroeconomic backdrop, the Altcoin market may continue to face pressure in the short term. Whether Bit, ETH and other mainstream assets can defend their key support levels will have a significant impact on market confidence. At the same time, the performance of Altcoins like Solana and Dogecoin may be more volatile, as these assets often exhibit higher sensitivity in market fluctuations.
Powell repeatedly mentioned the uncertainty of the economic outlook at the press conference and reiterated that future policy adjustments will be data-dependent. In the context of an increasingly complex global macroeconomic environment, investors need to carefully evaluate their Altcoin allocation strategies and closely monitor upcoming economic data to assess the medium- and long-term trends of the market.
Although the current market sentiment is gloomy, analysts generally believe that this round of adjustment also provides strategic deployment opportunities for patient long-term investors. The price correction of mainstream Altcoins may lay the foundation for future upside, while some oversold Altcoins may see higher rebound potential when the market recovers.
Annex: Full text of Powell's statement:
Recent indicators suggest that economic activity continues to expand at a solid pace. Since the start of this year, labor market conditions have generally eased, with the unemployment rate rising somewhat but remaining at a relatively low level. The inflation rate has moved towards the Committee's 2% target, but remains slightly elevated.
The Committee seeks to achieve maximum employment and a 2% inflation target over the longer run. The Committee judges that the risks to its dual mandate are broadly balanced. The economic outlook is uncertain, and the Committee is attentive to the two-way risks to its objectives.
To support its objectives, the Committee decided to lower the target range for the federal funds rate by 25 basis points to 4.25% to 4.5%. In determining the extent and timing of any further adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the incoming information and its implications for the economic outlook. The Committee is prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessment will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action: Chair Jerome Powell, Vice Chair John C. Williams, Thomas Barkin, Michael S. Barr, Raphael W. Bostic, Michelle W. Bowman, Lisa D. Cook, Mary C. Daly, Philip N. Jefferson, Adriana Kugler, and Christopher J. Waller. Nay: Beth M. Hammack, who preferred to maintain the federal funds rate target range at 4.5% to 4.75%.
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