Crypto Markets Tumble Following Federal Reserve Rate Cut, Liquidations Hit $850M
Although market participants expected a modest interest rate cut, Fed Chair Jerome Powell’s comments about the US Central Bank taking a conservative approach to control inflation in 2025 fueled uncertainty among traders, causing significant sell-offs.
Fed Revises Its Inflation Target for 2025 to 2.5%
While Powell noted declining inflation, he said the drop had been slower than the Fed’s expectations. Consequently, the American Central Bank adjusted its inflation forecast for next year upwards to 2.5%. This move suggests tough economic conditions in 2025, which could limit investors’ ability to pour capital into financial markets like crypto.
The expected shift in the Fed’s approach to monetary policy resulted in sharp crypto price drops. Bitcoin briefly plummeted below $100,000 after losing about 8% of its value within an hour. However, it has climbed to $101,036 as of this writing. Similarly, altcoins led by Ethereum suffered massive losses, triggering liquidations worth $867 million, according to CoinGlass data.
Trader Loses $7 Million as Ethereum Price Dips
Long positions accounted for $748 million of the figure, while shorts were liquidated for $119 million. Moreover, the CoinGlass report shows that 299,224 traders were affected by the latest price drops. One trader on Binance lost $7 million after their long position on Ethereum was liquidated.
Despite the setbacks, crypto traders remain bullish on digital assets, according to the Crypto Fear and Greed Index, which is now at 75. This positive sentiment suggests that Bitcoin and other crypto assets are now the most in-demand investment products.
Reinforcing the optimism, institutional investors have continued to pour significant funds into Bitcoin ETFs this week. BlackRock’s Bitcoin ETF, for instance, has seen over $945 million worth of inflows in the past four days. Meanwhile, Farside Investors data shows a combined investment of $2.1 billion for all Bitcoin ETFs.
Why Are Crypto Enthusiasts Bullish?
So, what’s fueling the bullish sentiment on crypto? One of the primary drivers is that the United States is about to have a pro-Bitcoin President for the first time in history. Many crypto enthusiasts expect incoming President Donald Trump to honor his promises, which include introducing fair regulations and adopting a Bitcoin reserve. If he fulfills them, cryptocurrencies will benefit massively.
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