Bitcoin fell sharply for the first time in four days as markets reacted to the Federal Reserve’s latest rate decision. The apex crypto tumbled by as much as 5.3%, dropping to $100,752 after briefly soaring past $108,000 earlier this week in a record-breaking rally. Traders, spooked by the slower-than-expected pace of easing, pulled back speculative bets, hitting Bitcoin and other riskier assets. Fed signals fewer cuts The Fed’s quarter-point rate cut on Wednesday was widely expected, but its forecast left markets cold. Officials projected the benchmark rate to fall to 3.75-4% in 2025, down from an earlier prediction of a full percentage-point reduction. Morgan Stanley described the updated outlook as “much more hawkish than we anticipated.” This cautious approach suggests the Fed is prioritizing inflation control over aggressive stimulus. Fed Chair Jay Powell admitted that the December decision was a “closer call” than previous ones. He said inflation was moving “sideways,” while risks to the labor market had “diminished.” These comments signaled that the central bank might adopt a more restrained pace of easing moving forward. The policy change sent shockwaves through global markets. U.S. Treasury yields climbed, with the two-year note—closely tied to Fed policy—rising 0.08 percentage points to 4.33%. The dollar strengthened by 1% against a basket of major currencies, while Wall Street’s S&P 500 dropped 1%. Risk assets, including Bitcoin, bore the brunt of this recalibration. A recalibration in monetary policy The Fed’s rate cuts have been framed as part of a broader “recalibration” of monetary policy aimed at curbing inflation. Officials raised their estimate of the neutral rate—one that neither stimulates nor constrains the economy—to 3%, up from 2.5% a year ago. Revised forecasts showed the Fed expects core inflation, which excludes food and energy prices, to reach 2.5% in 2025 and 2.2% in 2026. These figures are slightly higher than earlier projections. Meanwhile, the unemployment rate is expected to hold steady at 4.3% over the next three years. Markets were already on edge following the September decision, where Fed Governor Michelle Bowman dissented, marking the first internal opposition to a rate cut since 2005. The December move, though expected, came amid continued debate among officials about inflation’s trajectory. The Fed’s preferred inflation gauge, the core personal consumption expenditures price index, rose at an annual rate of 2.8% in October. Powell described this phase as a “new process” in the Fed’s approach, explaining that future rate cuts would require a higher bar for approval. The Fed’s goal remains clear: bring inflation back to 2% without derailing the labor market or broader economy. From Zero to Web3 Pro: Your 90-Day Career Launch Plan
