Bitcoin Drops to $101K as Altcoins Spiral Due to Hawkish Federal Reserve Signals

Federal Reserve’s 25 Basis Point Rate Cut and Hawkish Outlook Impact Bitcoin and Altcoins

The Federal Reserve has reduced its benchmark federal funds rate by 25 basis points to a range of 4.25%-4.50%, marking its third consecutive rate cut this year and totaling 100 basis points since September. While this move was anticipated, the market’s focus shifted to the Fed’s updated economic projections and Chairman Jerome Powell’s press conference, which conveyed a more hawkish stance.

The Fed’s quarterly economic projections, including the “dot plot,” indicate a slower pace of future rate cuts, with the federal funds rate expected to decline to 3.9% by year-end 2025, up from the 3.4% projected in September. Inflation expectations also rose, with Personal Consumption Expenditures (PCE) inflation forecasted at 2.5% for the next year, compared to the previous estimate of 2.1%.

In response to the Fed’s announcement, Bitcoin (BTC) experienced a decline, dropping from $104,000 to around $101,000, a nearly 5% decrease over the past 24 hours. Other cryptocurrencies, such as XRP, Cardano’s ADA, and Litecoin’s LTC, also saw significant losses, each falling nearly 10%. The S&P 500 index similarly declined to session lows.

During the press conference, Chairman Powell attributed the slower pace of projected rate cuts to recent inflation readings and higher inflation expectations for the coming year. He noted, “We are closer to the neutral rate, which is another reason about further moves.”

Addressing a question about the potential for a government-established strategic Bitcoin reserve, Powell stated that the Fed is “not allowed to own bitcoin” under the Federal Reserve Act and is not seeking a change in this regard.

Analyst Andre Dragosch from Bitwise commented on the Fed’s current challenges, stating, “The biggest headache for the Fed right now is the fact that financial conditions have still tightened despite the Fed cutting rates.” He highlighted that long bond yields and mortgage rates have increased since September, and the dollar has appreciated, indicating tighter financial conditions. Dragosch also noted that a continued appreciation of the U.S. dollar poses a macro risk for Bitcoin, as it is associated with global money supply contraction, which tends to be detrimental to Bitcoin and other crypto assets.

Despite these challenges, Dragosch pointed to on-chain factors supporting Bitcoin, particularly the ongoing decline in exchange balances, which suggests that the Bitcoin supply deficit continues to intensify.