Author: BitpushNews
On Wednesday afternoon local time, the Federal Reserve announced a 25-basis-point cut in the benchmark policy rate, but hinted that the number of rate cuts in 2025 could be lower than previously expected, causing the US stock and Altcoin markets to plummet.
The Federal Reserve's latest quarterly economic forecast shows that there may only be two rate cuts in 2025 - lower than the four forecast in September and lower than the three expected by the market before the meeting, meaning they will be more cautious in balancing the relationship between inflation and economic growth. The Fed members' forecasts for personal consumption expenditures (PCE) and core PCE inflation next year have risen from 2.1% and 2.2% forecast in September to 2.5%, respectively.
Powell described this shift as a "new phase" of monetary policy, emphasizing that after a 100-basis-point rate cut in 2024, interest rates are now much closer to a neutral stance.
As of the close of the day, the three major stock indexes fell across the board, with the Dow Jones falling 2.59% initially, setting a record for the longest single-day losing streak in 50 years (down for 10 consecutive trading days); the S&P 500 index fell 2.95%, and the Nasdaq fell 3.56%. The US dollar soared to a two-year high, and the Chicago Board Options Exchange Volatility Index (also known as the VIX index and the Wall Street Fear Index) soared 58% to 25, reflecting increased investor uncertainty and heightened anxiety about future interest rates.
Did Powell's remarks "slap" Trump?
At Wednesday's press conference, in response to a question from an Axios reporter about former President Trump's idea of establishing a strategic Bit reserve after taking office, Powell said: "We are not allowed to own Bit, the Federal Reserve Act specifies what we can own, and we do not wish to change the law. This is something for Congress to consider, but we do not want the Federal Reserve to change the law."
Bit fell to $104,000 after the Fed's announcement, and then fell to around $100,256, down nearly 5% in 24 hours, after Powell's remarks. Altcoins fell even more, with XRP, ADA, and LTC down nearly 10%.
Trump has repeatedly stated that he wants to establish a strategic Bit reserve. In an interview with CNBC last week, he mentioned: "We will make great achievements in the field of Altcoins, because we do not want any other country to embrace Altcoins, we want to be the leader."
Bitpush previously reported that Republican Senator Cynthia Lummis of Wyoming is drafting a bill that will instruct the US Treasury Department to purchase 1 million Bits over the next five years, with the funding coming from Federal Reserve bank deposits and gold reserves.
Other US states have also proposed bills to invest in Bit, with a Republican Pennsylvania state legislator proposing a bill in November to allow the Pennsylvania Treasury Department to invest in Bit, digital assets, and Altcoin-based exchange-traded products.
The idea of establishing a strategic Bit reserve has also been criticized. In an opinion piece published by Bloomberg last week, former New York Federal Reserve President Bill Dudley said it would be a "bad deal" for Americans.
A report released by Barclays Bank this week argues that funding a strategic Bit reserve may require congressional approval and the issuance of new government debt. Barclays Bank analysts said that given the potential ways to establish such a reserve, "we doubt the plan will face strong resistance from the Federal Reserve."
What will the future trend be?
The Altcoin market currently has overly high expectations for the US potentially establishing a strategic Bit reserve, while ignoring other countries, and Grayscale Research's research shows that sovereign wealth funds in Asia and the Middle East are more likely to be the next driving force.
Zach Pandl, head of research at Grayscale, said: "The sharp drop in Bit price after Fed Chair Powell's speech suggests that investors may have overestimated the theoretical possibility of a Bit strategic reserve. Grayscale Research expects more nation-states to adopt Bit, but the next step is more likely to be sovereign wealth funds in Asia or the Middle East, which already manage highly diversified asset pools."
Andre Dragosch, head of European research at Bitwise, believes: "I think the Fed's biggest problem right now is that despite the rate cuts, the financial environment is still tightening. Yields on long-term bonds and mortgage rates have been rising since September, the dollar has appreciated, which also means the financial environment is tightening. The continued appreciation of the dollar also poses macroeconomic risks to Bit, as the appreciation of the dollar is also associated with a contraction in the global money supply, which is often detrimental to Bit and other Altcoins. In fact, the Fed's net liquidity has continued to decline. In my view, the tightening of liquidity and the strength of the dollar are also the biggest risks facing BTC... On the other hand, the on-chain factors of BTC continue to be very favorable, especially the continued decline in exchange balances, which supports the hypothesis that the BTC supply gap will continue to widen."
The drop in Bit has led to a dramatic change in the positions of bulls and bears. According to charts from Altcoin analyst Skew, long positions have been stopped out and short positions have profited, with Bit price falling to the $100,000 to $98,000 range seeking support. Skew emphasizes that to reverse the downtrend, Bit price must regain the $100,000 to $101,400 range through spot buying and consolidate above it on the daily chart.
Additionally, the 4-hour chart shows that BTC bulls need Bit to show strong buying power around $100,000 and successfully close above $101,400 to consolidate the uptrend. If unable to hold this level, it may retest the support around $98,000 and the accumulation area.
Blockchain analysis platform Santiment analyst is optimistic and posted on X saying: "Considering that BTC is temporarily holding above $100,000 and the decline is not as large as normal volatility compared to the S&P 500 index, if it stabilizes in the next 24-48 hours, this can actually be interpreted as a bullish signal."
