Crypto crash: Crypto market downturn, Fed’s chairman earlier statement about interest rate cut

Why is crypto crashing:

Powell suggested that fewer rate cuts might occur in the first quarter of 2025

 

The cryptocurrency market experienced substantial liquidations recently, with altcoins like Dogecoin (DOGE) and Solana (SOL) seeing significant losses of $3.86 million and $3.72 million, respectively. In total, 146,478 traders were affected by liquidations, marking a challenging period for the market. The largest single liquidation order, valued at $11.94 million, occurred on Binance within the ETH/USDT trading pair, highlighting the volatility impacting even major cryptocurrencies like Ethereum.

The market downturn was fueled by remarks from Federal Reserve Chair Jerome Powell during the December 17 FOMC meeting. Powell suggested that fewer rate cuts might occur in the first quarter of 2025, a statement that dampened investor optimism. Such comments point to the Fed’s cautious approach to economic recovery, adding pressure on riskier assets like cryptocurrencies, which are particularly sensitive to changes in interest rate expectations.

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Adding to market concerns, hotter-than-expected data from the Job Openings and Labor Turnover Survey (JOLTs) raised fears of prolonged monetary tightening. This data reinforced the belief that the economy might still face extended periods of high-interest rates. Such tightening can reduce liquidity in financial markets, making speculative investments, including cryptocurrencies, less attractive to investors.

However, there may be potential for positive developments as former President Donald Trump’s January 20 inauguration nears. Anticipation around his Cabinet announcements and potential market-friendly policies could offer some hope for a rebound in investor sentiment. Speculative optimism may act as a short-term catalyst, even if broader concerns about monetary policy persist.

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Ultimately, it remains uncertain whether the crypto market will recover quickly or continue its bearish trajectory. The market’s response will depend on a mix of economic signals, Federal Reserve policy decisions, and potential geopolitical developments. Investors will likely be closely monitoring these factors as they navigate the evolving landscape of cryptocurrency investments.