Interest Rate Cut Impact: Bitcoin Price Reaction Unraveled With Future Projections

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The Bitcoin price experienced a significant downturn on Wednesday, briefly falling below the $100,000 milestone as the US Federal Reserve’s (Fed) cautious outlook on interest rate cutsdampened crypto investments. 

At one point in Wednesday’s trading session, the market’s leading crypto dropped to $98,760 before recovering to the six-figure mark. Other cryptocurrencies, including Ethereum (ETH) and Dogecoin (DOGE), also faced substantial retraces.  Fed’s Cautious Rate Cut Sparks Uncertainty In Markets

The Federal Reserve’s decisionto lower borrowing costs for the third consecutive time came with a tempered forecast for future reductions, particularly for 2025. Chair Jerome Powell emphasized that more progress is needed on inflation before the central bank can consider further easing of monetary policy. 

Tony Sycamore, a market analyst at IG Australia Pty, noted that the Fed’s decision was largely anticipated given recent trends in US inflation and economic activity. 

However, it acted as a catalyst for shedding some of the “speculative excess” that had entered risk assets, including stocksand Bitcoin, especially following the recent US elections, according to Sycamore.  Related Reading Bitcoin Price Still Mirroring Bullish Move From 2023, What To Expect After Hitting $108,000 ATH 1 day ago

Despite this dip, the Bitcoin price remains up approximately 50% since the US elections on November 5, largely due to President-elect Donald Trump’s commitment to deregulating the cryptocurrency sectorwhile floating the idea of establishing a national stockpile of Bitcoin, further boosting market sentiment.

Paul Veradittakit, managing partner at Pantera Capital, expressed optimism about the Bitcoin price future, stating, “All signs point to a good floor and outlook for Bitcoin,” even as some traders took profits following the Fed meeting. 

Market dynamics shifted post-Fed meeting, with Sean McNulty, director of trading at liquidity provider Arbelos Markets, reporting an uptick in demand for options to hedge against potential Bitcoin declines. 

Zann Kwan, chief investment officer at Revo Digital Family Office, indicated that a temporary retreat into the low $90,000s for Bitcoin is possible. Bitcoin Price Eyes Key Resistance Level At $105,400

Crypto analyst Ali Martinez provided insights into market sentiment, emphasizing that current market behavior reflects expectations about future conditions rather than past events. 

The analyst notedthat while the 25 basis point rate cut was largely anticipated, the Fed’s updated outlook for 2025 was not well received. Instead of three anticipated rate cuts in 2025, the Fed now projects only two, raising concerns about persistent inflation. Related Reading Bitcoin Could Peak Between $160,000 And $290,000 If These Historical Patterns Repeat – Report 1 day ago

Recent inflation data has also been disheartening, with core consumer price index (CPI) figures annualizing at 4% and core personal consumption expenditures (PCE) approaching 3.5%. Producer price index (PPI) figures are similarly trending upward, suggesting that inflationcould remain an ongoing challenge.

However, Martinez emphasizes that the real turning point came during Powell’s press conference when he described the decision as a “closer call,” indicating that not all Fed officials were in agreement about the cuts. This sent the US dollar soaring to levels not seen since 2022, which typically correlates with declines for BTC.

Martinez also disclosedthat the Bitcoin price had broken out of a head-and-shoulders pattern on Wednesday, which resulted in its drop just below $99,000, but emphasized that the cryptocurrency must surpass $105,400 to negate any bearish outlook. The daily chart shows BTC’s price volatility experienced on Wednesday. Source: BTCUSDT on TradingView.com

At the time of writing, the Bitcoin price stands at $101,180, down 2.2% over the past 24 hours. 

Featured image from DALL-E, chart from TradingView.com