Powell's hawkish remarks pummel markets as crypto sees "Black Thursday"
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Powell's hawkish remarks pummel markets as crypto sees "Black Thursday"
Expecting only two rate cuts next year.
Navigating Web3 tides with focused insightsBy 1912212.eth, Foresight News
This morning, the Federal Reserve cut interest rates by 25 basis points as expected. However, the crypto market turned turbulent—BTC slid from $105,000 immediately after the Fed's decision was announced, dropping as low as the $99,000 level. Ethereum fell from around $4,000 to near $3,500.
Across altcoins, most tokens declined except for a few. AI, meme, and L1 sectors were hit particularly hard. Over the past 24 hours, AI tokens saw WLD drop over 13%, ARKM down more than 17%, and RENDER fall over 11%. Among L1s, SOL dropped over 8%, SEI over 13%, and SUI more than 9%. Meme coins including PEPE, BONK, FLOKI, and WIF all plunged over 18%.
In terms of derivatives data, total liquidations across markets reached $674 million in the past 24 hours, with $577 million in long positions wiped out. More than 237,000 traders were liquidated globally. The largest single liquidation occurred on Binance’s ETH/USDT pair, valued at $4.0677 million.
The crypto market is filled with despair. Chris Burniske, partner at Placeholder, commented: “If you’re frustrated that you didn’t sell before the market pullback following the Fed’s FOMC meeting, understand that you don’t actually have much edge in predicting market reactions. Use this experience as an opportunity to slow down. Avoid overtrading. In the long run, with patience, you’ll be fine.”
With the widely anticipated bull market cycle underway, why is the market now sharply declining?
Hawkish Fed Rate Cut
Crypto assets are becoming increasingly influenced by macroeconomic factors.
The Federal Reserve announced a 25-basis-point rate cut on Wednesday, in line with expectations. However, Fed officials significantly raised their median projection for future policy rate targets and markedly increased inflation forecasts for next year and beyond, now expecting only two rate cuts in 2025.
Chair Powell described the decision to cut rates at this meeting as "fairly close," noting that risks to achieving the Fed's dual mandate of controlling inflation and promoting employment are roughly balanced. He emphasized that significant progress has been made on inflation control. Although rates have already been cut by 100 basis points cumulatively, they remain meaningfully restrictive to economic activity, and the Fed remains "on a path of further rate cuts." That said, officials need to see more progress on inflation before proceeding with additional cuts.
Powell also noted that while policies under the incoming U.S. administration have not yet been formally unveiled, the Fed has done substantial preparatory work and will be ready to conduct careful, deliberate assessments once specific policies emerge, enabling appropriate policy responses.
In his opening statement, Powell said the U.S. economy appears strong overall and has made notable progress toward the Fed’s goals over the past two years. The labor market has cooled from its prior overheated state but remains solid. Inflation is now closer to the Fed’s 2% long-term target. He added that even if inflation only falls to 2.5% next year, the Fed could still proceed with rate cuts as projected in the dot plot, given that inflation is moving in the right direction.
As Powell hinted at a slower pace of future rate cuts, U.S. equities declined. The Dow Jones Industrial Average may be heading for its 10th consecutive day of losses—the longest losing streak since 11 straight days of declines in October 1974. All 11 major sectors of the S&P 500 were lower, led by real estate.
Still, some remain optimistic about rate cuts next year. Kathy Bostjancic, chief economist at Nationwide Financial, said attention will turn to Trump in 2025. Based on expectations of disinflationary trends—especially in services—the Fed could deliver another 75 basis points of rate cuts next year.
BitMEX Co-Founder: Sharp Decline Expected Around Trump Inauguration
Arthur Hayes, co-founder of BitMEX and chief investment officer at Maelstrom, commented in a recent post that while he remains bullish on Bitcoin’s long-term outlook, does this mean Bitcoin will rise steadily to $1 million without any major pullbacks? Absolutely not.
"I think the market hasn't realized that Trump actually has very limited time to get things done. Market expectations for Trump and his team are currently too high."
Hayes stated: "Before entering the bear-market crash phase of the bull cycle, the crypto market will suffer a painful drawdown around January 20, 2025—the date of Trump’s inauguration. Maelstrom (my fund) will proactively reduce certain positions ahead of time and hope to re-enter at lower prices sometime during the first half of 2025. If the market breaks out strongly around January 20 instead, we will acknowledge our misjudgment and re-enter the market after licking our wounds."
Bitcoin’s 'Biggest Buyer' MicroStrategy May Pause Purchases
MicroStrategy, one of Bitcoin’s most aggressive buyers, may soon pause its accumulation, temporarily removing a major source of demand. Yesterday, Protos reported that MicroStrategy (MSTR) could enter a quiet period in January 2025, halting fundraising via at-the-market (ATM) equity and convertible bond offerings used to purchase Bitcoin. The report cites a venture capitalist who claimed Executive Chairman Michael Saylor “will be in a quiet period throughout January and won’t be able to issue new convertibles to buy Bitcoin.”
While the SEC does not explicitly prohibit insider trading during quarter-end or earnings release periods, many companies voluntarily impose quiet periods lasting two weeks to one month to avoid the appearance of insider trading. MicroStrategy plans to release its earnings on February 5, 2025, and will join the Nasdaq 100 Index on December 23, 2024.
There are various speculations regarding the exact timing of the quiet period—some suggest it will last the entire month, others predict a 30-day window starting January 14. MicroStrategy has not yet issued an official statement.
Summary
Despite current market pessimism, there are catalysts to look forward to in January next year. On January 20, Donald Trump will officially assume the presidency. Policy tailwinds could encourage institutions to confidently allocate capital into the crypto market, lifting asset prices. Crypto markets often follow certain “market superstitions,” such as historically seeing strong gains around the Lunar New Year.
For example, Bitcoin posted a monthly return exceeding 44% in February this year during the Lunar New Year period. Next year’s Lunar New Year falls on January 29. The market may find a turning point in January.
In addition, the FTX restructuring plan is set to take effect in early January, with payouts distributed in fiat and stablecoins, returning billions of dollars to the market.
While January 2025 holds promise, caution is warranted. Market cycles are highly volatile, and investors should prioritize risk management.
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