By Michael Scott
Bitcoin plunged below $96,000 as altcoins witnessed a broad-market tumble following the hawkish comments by Fed chair Jerome Powell.
Powell appeared to rattle investors across all asset classes, indicating that the Federal Reserve would only have two rate cuts next year. Despite announcing a 25 basis point cut to the interest rates, the remarks rattled the markets, with Bitcoin suffering the brutal hit to losing the $100K range.
Hawkish Comments Spark market-wide Sellf
The Fed chair hurt investors who anticipated four instances of interest rate cuts. However, the Wednesday announcement sparked a market-wide selloff that garnered momentum on Thursday, leaving the crypto asset prices to plunge further on Friday.
While Layer-2 network Morph co-founder Azeem Khan considered the pullback a healthy breather after the relentless rise, most crypto assets have surrendered the post-election gains.
Bitcoin leads in the tumble after surrendering the struggle to hold above $100K. The proximity to this milestone quickly faded on Thursday as the pioneering crypto slid below $97,000.
Crypto Assets Stuck in Blood Bath
The premier asset modestly recovered to test $98,000 only to give in to the selling pressure that condemned the prices to a 4.5% intraday loss below $96,000. Reflecting on Thursday shows altcoins suffered a worse downtrend as the top-20 ranked eroding over 10% of their value.
The decentralized finance (DeFi) king, Ether (ETH), slid 10.8% to change hands below $3,500 as other altcoins, including Cardano (ADA), Avalanche (AVAX), Aptos (APT), and Chainlink (LINK) saw 10%-20% of their value eroded.
Meme coins, including Dogecoin (DOGE) and Shiba Inu (SHIB), were not spared as they suffered losses of 14% and 11% respectively. The market-wide blood bath has seen Solana (SOL) sink to the bottom price ever since November 7. SOL decline has nearly erased the post-election rally as this altcoin is 26% below its recent peak attained a month ago.
Scrutiny into the charts shows that since the rate decision conveyed by the Fed policymakers, leveraged crypto derivatives positions have seen a liquidation average of $1 billion daily. Per CoinGlass data, liquidated positions are at $1.07 billion, with long positions accounting for $906 million.
Has Crypto Assets Decoupled From Traditional Markets?
Crypto asset prices are stuck in the red zone, with traditional markets slightly bouncing from the lows witnessed on Wednesday. Nonetheless, they surrendered the pre-market gains. The S&P 500 and the tech-heavy Nasdaq have mild changes from Thursday’s close.
The crypto prices are wholly reversed after the digital asset value rose almost vertically since Donald Trump’s re-election in early November. The industry rode on the hopes of the pro-crypto policies as he returned to the Oval Office with key appointments of pro-crypto advocates to lead CFTC and SEC.
The projection by the Fed of a slower rate for 2025 coincided with Powell’s hawkish tone warning on the rising inflations. The two developments caught the investors offside, triggering a broad-market selloff in crypto, equities, and gold.
The US dollar index (DXY) rallied to its strongest milestone above 108, the highest since November 2022. The 10-year treasury yields posed a sharp uptick above 4.6% to revisit May levels.
LMAX Group market expert Joel Kruger noted that the crypto assets have been on the verge of possible correction since the record run to breach above $100,000. The strategist indicated the catalyst from the traditional markets, hence the fallout from the Fed decision as too much to overlook.
Morph’s Khan notes that a pullback is healthy if one zooms out the year-over-year growth. He adds that historically, the year-end selloffs witnessed across securities occur as the investors seek to offset losses against the accrued gains. Khan noted that investors sell to lower their tax liabilities. However, he admitted to the difficulty of indicating the amount that fuels the current trend, though it could be the contributing factor.