The cryptocurrency market witnessed a bearish turnaround on Thursday, with Bitcoin (BTC) and Ethereum (ETH) experiencing price drops.
In the past 24 hours, Bitcoin fell by four percent and dipped below the $25,000 mark, while Ethereum retreated by six percent and struggled to maintain its position at $1,600.
This downward trend in the crypto markets followed the Federal Reserve’s latest monetary policy decision. The U.S. central bank met expectations and decided to pause its cycle of rate increases after implementing 10 consecutive interest rate hikes.
However, the Fed also hinted at more hikes in the future. In its revised interest rate forecast, the Fed raised its estimation for this year to 5.6 percent, surpassing the 5.1 percent projected in March.
The central bank also anticipated two additional 25 basis point hikes by the end of the year. The Fed revised its estimates for 2024 and 2025, increasing them to 4.6 percent and 3.4 percent, respectively, from the earlier projections of 4.3 percent and 3.1 percent.
Fed Chairman Jerome Powell’s remarks supported the expectation of further rate hikes. Powell said that “almost everyone” at the central bank agreed that some additional rate hikes would be appropriate this year, although a slightly slower pace might be reasonable.
“It will be fitting to cut rates at a time when inflation is coming down significantly. And again, we are talking about a couple of years,” Powell said. “As anyone can see, not a single person on the Committee wrote a rate cut this year, nor do I think it’s appropriate.”
Experts interpreted the central bank’s comments and Powell’s statements as more hawkish than initially anticipated, with many disregarding the possibility of a rate cut this year altogether. Some analysts also said that the Fed may struggle to achieve its objective of bringing inflation to two percent without triggering a recession.
At the same time, regulatory developments surrounding major cryptocurrency exchanges Binance and Coinbase weighed on market sentiment. The SEC, meanwhile, has requested additional time, up to four months, to respond to Coinbase’s request for new cryptocurrency regulations.
“We have to remember that the crypto market is a relatively small market, and a few hundred million dollars can move the market for a few percent,” said Ruslan Lienkha, director of markets at crypto service provider YouHodler.
“So let’s see the following days if it is really a downward trend or just a single whale sell off.”
TickMill Group experts noted that while risk-off sentiment had shown positive signs before the Fed meeting, the cryptocurrency market remained stagnant.
“The issue for crypto currently is the latest wave of negative news to hit the sector,” the experts said while highlighting the growing uncertainty in the digital asset space. Regarding Bitcoin’s price correction, they said that it has been trading within a corrective bear channel.
XYO Network co-founder Markus Levin expressed a more optimistic viewpoint, suggesting that the global macro setup in the crypto market is undergoing significant shifts. He believes the market may have already hit its bottom and anticipates sideways movement for Bitcoin and other coins in the coming months, interspersed with periods of volatility.
“When the BTC halving kicks in next year, however, then I think we’re off to the races,” he said.
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