The Fed cools Bitcoin. The American Federal Reserve (Fed) announced a cut in its key rate of 25 basis points, but also revised upwards its inflation forecasts for 2025. This announcement surprised the markets, which were expecting a policy more accommodating monetary policy from the Fed. The price of bitcoin, which had reached a new all-time high at $108,000, fell 4.6% to return to around $100,000.
- The Fed surprised the markets by revising its inflation forecasts upwards for 2025, causing bitcoin to fall.
- Jerome Powell emphasized the independence of the Fed and clarified that it does not plan to own bitcoin.
Fed reduces number of planned rate cuts in 2025
Fed Chairman Jerome Powell said at a news conference that the central bank was prepared to adjust monetary policy based on the needs of the U.S. economy. However, he clarified that the Fed was now only considering two additional rate cuts in 2025compared to three previously. It also raised the inflation forecast for 2025 from 2.1% to 2.5%.
This decision by the Fed is explained by the uncertainties linked to the political changes to come in the United States, with the entry into office of the Trump administration. This could put in place protectionist measures, such as customs tariffs on imports, mass expulsions of undocumented workers or even expansionist budgetary policies. These factors could weigh on economic growth and price stability.
A high-voltage press session for Bitcoin
During the question session, Jerome Powell’s answers were like a cold shower for investors. The latter reminded that the Fed is NOT authorized to own Bitcoin and that it does not seek to hold it.
Jerome Powell stressed that the Fed remained independent and would not be influenced by political pressure.
He recalled that the Fed’s mission was to maintain price stability and promote full employment.
Bitcoin and cryptocurrencies correct after Fed announcement
The Fed’s announcement caused a correction in the financial markets, particularly in the cryptocurrency market. Bitcoin, which had crossed the $100,000 mark for the first time in its history, lost nearly 5% in a few hours. Other cryptocurrencies also suffered significant losses. Ethereum fell 5.96% to $3,600.
For their part, the stock markets recorded theirr biggest drop since 2022 after Jerome Powell’s speech.
According to some analysts, this correction is due to a movement of liquidation of long positions on bitcoin futures contracts. Indeed, traders who had bet on the continued rise of bitcoin were forced to sell their contracts to avoid excessive losses. This increased the selling pressure on the market.
Analysts believe that bitcoin could find support between $98,000 and $100,000, where an area of strong demand lies. They believe bitcoin could rebound if buyers come forward at these levels. However, they caution that bitcoin remains volatile and sensitive to macroeconomic events. And they are right to warn because this morning when we woke up Bitcoin was above 100,000 dollars again.
Could bitcoin continue its rise in 2025? Opinions are divided. Some experts see bitcoin reaching $200,000 or more thanks to the growing adoption of cryptocurrencies around the world. Others are more cautious and fear a more severe correction, or even a bursting of the speculative bubble. Case to be continued, on the Journal du Coin.
