Why did encryption decline? Federal Reserve Chairman Jerome Powell’s latest monetary policy update hit the cryptocurrency markets like a hammer. Bitcoin, which had crossed the $100,000 line, stumbled, falling 4.6% to $101,300 after the 25 basis point interest rate cut was announced.
Ethereum followed suit, falling 5.96% and landing at $3,600 in the aftermath. What’s going on here?
Why did encryption decline? Bitcoin reacts to price adjustments
As one Twitter user wrote about the event, “Giumi said something very depressing about 2025 (no more late cuts) to stand up to the big, vile Tumbi!!!”
actually. Powell described this latest rate cut as a “closer call,” positioning flat inflation data as the elephant in the room. Cleveland Fed President Beth Hammack objected, preferring no movement on interest rates at all.
Economic growth looks a little rosier, unemployment is marginally lower, but inflation in 2025 will rise more than they had hoped. The Fed has scaled back plans for next year to just two rate cuts, abandoning its more aggressive September playbook that included four cuts.
To make matters worse, Powell commented on Bitcoin’s strategic reserve, saying, “We’re not allowed to own Bitcoin,” but later added, “That’s the thing that Congress should be thinking about.”
Cryptocurrency analysts wasted no time analyzing the ramifications. Trader Skew noted that Bitcoin’s decline wiped out positions across the board. The key now is to regain ground in the $100,000 to $101,400 range before the daily close.
“Bitcoin price fell in a block of bids in the range of $100,000 to $98,000. Spot bids in this area will determine the course in the short term,” Scio said.
In addition, CryptoQuant analyst Percival noted a shift in market flow, pointing to a sharp decline in profit-taking by long-term holders. Realized profits fell from $10 billion to $3 billion in just three weeks, suggesting that these investors are now content to wait and see for the next wave of gains.
Coinbase Premium and institutional demand
Although Bitcoin recently rose to an all-time high of $103,700 earlier this month, some analysts point to a decline in US demand. CryptoQuant data revealed a notable decline in Coinbase’s Bitcoin premium, an indication of institutional interest. The trader by the pseudonym Yonsei Dent warned that this may reflect fundamental weaknesses in Bitcoin’s medium-term momentum.
“A lower Coinbase premium may indicate lower demand from US buyers. Investors should monitor this trend closely,” Dent noted.
A hawkish Fed and the future of Bitcoin
However, Powell’s comments regarding the Fed’s inability to hold Bitcoin as part of its reserves may be the biggest knock on the markets. Of course, the US government can always add Bitcoin to the treasury.
“We are not allowed to own bitcoin. The Federal Reserve Act determines our asset capacities, and we are not seeking to change that,” Powell explained.
The idea of President-elect Trump treating Bitcoin as a strategic reserve for the United States has sparked speculation and discussions about its long-term market implications. Although Bitcoin’s drop below $100,000 has sparked some jitters, experienced traders see the pullback as nothing more than just market mechanics. Optimistic holders and analysts argue that the setup still favors a significant upside by 2025.
the Bitcoin price analysis 2025 It highlights that although disruptions are expected in the short term, the broader narrative of Bitcoin adoption and appeal among retail and institutional investors remains strong.
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