The recent Federal Reserve meeting marked a significant turning point in the financial landscape, reverberating through various markets, particularly the cryptocurrency sectorThe Fed's decision to lower interest rates by 25 basis points to a range of 4.25%-4.5% aligned with widespread market expectationsHowever, the accompanying hawkish remarks from Chair Jerome Powell, along with adjustments to economic forecasts, sent shockwaves through investor sentiment, causing substantial losses in the cryptocurrency realm.

Powell emphasized in the post-meeting press conference that, while the cut was anticipated, future reductions could be less aggressive than the market had hopedHe conveyed a cautious message, indicating that the Fed plans to implement only two rate cuts by 2025, while also raising inflation expectations for that year to 2.5%, a notable increase from the previous 2.1%. This reflects growing concerns about persistent inflationary pressures

Furthermore, Powell highlighted various uncertainties surrounding future economic policies, mentioning potential government moves toward protectionist measures such as tariffs on imports and mass deportations of undocumented workers, along with stretching fiscal deficitsThese factors call for a more prudent stance from the Fed.

Such potential policy changes could exacerbate inflationary pressures and lead to widespread market ramificationsFollowing the Fed’s announcement, Bitcoin's price plunged by 5.6%, falling below the $100,000 mark, although it has since shown some recoveryEthereum fared worse, with a decrease of 6.96% to $3,600. Other altcoins, including Dogecoin and Solana, were similarly affected, suffering drops of over 7% and 8%, respectivelyThe overall altcoin market showcased a particularly grim trend, with some mid- and small-cap assets experiencing declines of over 10%.

Data revealed that in the 24 hours following the Fed’s announcement, a staggering 236,199 traders faced liquidations, culminating in a total liquidation amount of $672 million, with the largest single liquidation on Binance for ETHUSD_PERP valued at $4.0677 million

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This statistic underscores the extreme volatility of the market and the inherent risks faced by investors.

**Post-Peak Risk Mode**
Bitcoin hit an all-time high of $108,135 on December 17, marking a significant milestone in the cryptocurrency marketUnfortunately, the optimism was short-lived; by December 18, the price faced a sudden downturn, dropping around 5% to settle at $103,765, and by the 19th, it dipped below $100,000, touching almost $99,000 at one pointThis unexpected price adjustment ignited widespread panic among cryptocurrency investors, leading to a wave of sell-offs across the market.

In this chaotic market environment, the derivatives market wasn’t spared, facing massive liquidationsBitcoin liquidations totaled about $78.09 million, while Ethereum's reached $55.65 million, painting a bleak picture for the entire cryptocurrency market.

The violent fluctuations within the cryptocurrency sphere stemmed partially from market participants' expectations surrounding the Fed’s rate-cutting decision

The dominance of long positions signaled an overly leveraged bullish sentiment, exacerbated by profit-taking and a rising risk-averse mentality just before the Fed's announcementPrior to the Federal Open Market Committee (FOMC) meeting, sellers had already seized market controlThis seller pressure highlighted a standard risk-averse sentiment that preceded significant events, contributing to the cooling of Bitcoin’s priceMoreover, the ongoing adjustments in the cryptocurrency sector reflect a correlation with the weak performance of the U.Sstock market, which saw the S&P 500 drop by 0.4% to close at 6050.61 points, the Nasdaq composite losing 64 points, and the Dow Jones index experiencing its ninth consecutive day of losses—the longest streak since 1978, closing down 0.61% at 43,339 points.

**The Fed is Not Allowed to Hold Bitcoin**
With the Fed’s latest decision following its final rate-setting meeting of 2024, a new wave of sentiment swept through global financial markets

The central bank’s announcement to cut the benchmark interest rate by 25 basis points for the third consecutive time reassured investors, aligning perfectly with prior market expectationsOver the course of 2024, the Fed implemented three rate cuts during its eight policy meetings, which included one decrease of 50 basis points and two of 25 basis points each, totaling a cumulative reduction of 100 basis points.

The Fed's recently released dot plot indicated expectations of two additional 25-basis-point cuts in 2025, a significant retreat from the four cuts outlined in the previous September forecastFor 2026, a similar expectation of two cuts, each by 25 basis points, remains consistent with previous predictionsNotably, the projected median federal funds rate for late 2025 was raised to 3.9%, up from 3.4% in September, illustrating a considerable increase.

Powell's commentary post-meeting, particularly regarding the 2025 cutting plan, was interpreted by the market as hawkish

Additionally, he raised inflation expectations for 2025 to 2.5%, further exacerbating concernsAnalysts suggest that these adjustments may be reflective of policy changes anticipated under the incoming administration, such as increased tariffs and fiscal deficit expansion.

Powell reiterated that the Fed's policy adjustments aim to respond flexibly to the actual needs of the U.Seconomy, highlighting its proactiveness and adaptabilityHowever, he also underscored the uncertainty posed by geopolitical risks, urging caution in economic forecasts for the coming three years.

Commenting on the situation, Gennadiy Goldberg, head of U.Srates strategy at TD Securities, noted that the Fed signals a shift towards a more cautious approach in its rate cutsThis could result in market pricing that anticipates fewer than two cuts, particularly if economic data remains robustNick Timiraos, often referred to as the Fed's “mouthpiece,” also observed the new language regarding “magnitude and timing” in the policy statement, suggesting a gradual pace of rate cuts.

John Haar, managing director at Swan Bitcoin, conveyed that the Fed's decision to cut rates and indicate reduced future rate cuts suggests a hawkish bias in upcoming monetary policies

As a result of the Fed’s hawkish stance, futures markets adjusted expectations for the magnitude of rate cuts in 2025 to around 49 basis points, closely aligning with the dot plot's prediction of 50 basis points, as opposed to the previous market anticipation of cuts reaching up to 75 basis points.

Moreover, in response to inquiries about the potential for the government to establish Bitcoin reserves, Powell stated unequivocally that the Fed has no intention of holding Bitcoin, clarifying that the legal authority to do so rests solely with Congress and that the Fed is not seeking any legal alterations regarding cryptocurrencies.

These series of declarations have further complicated market expectations regarding the trajectory of future monetary policies.

**The Cryptocurrency Market Faces Continued Adjustments**
The Fed's latest meeting revealed crucial insights into their policy considerations

Not only did the central bank elevate growth forecasts for 2024 and 2025, but it also lowered unemployment rate expectations while significantly raising inflation projections, particularly for 2025, signaling the Fed’s acute focus on long-term inflation risks.

The dot plot projection from the Fed indicates only two potential rate cuts—each 25 basis points—in 2024. This stance reflects the Fed's determination to control inflation and compels markets to reassess future liquidity conditionsFollowing these developments, both the dollar and volatility index surged, while U.Streasury yields, equities, gold, and cryptocurrency markets broadly came under pressure.

In the present macroeconomic context, the cryptocurrency market could continue to face adjustments in the short termWhether leading crypto assets like Bitcoin and Ethereum can maintain critical support levels will significantly influence market confidence

Simultaneously, altcoins such as Solana and Dogecoin may exhibit heightened volatility, given their sensitivity to market swings.

Powell’s reiteration of the economic outlook's inherent uncertainties and his insistence that future policy adaptations will depend on evolving data, underscore the need for keen investor vigilanceIn light of the increasingly complex global economic backdrop, investors must carefully evaluate their cryptocurrency asset strategies and keep a close eye on forthcoming economic data to discern mid to long-term market trends.

Despite the current bearish sentiments, analysts remain optimistic that present adjustments may provide strategic opportunities for long-term investorsThe pullback of mainstream crypto assets could lay the groundwork for future upward movements, with certain undervalued altcoins poised for significant rebounds whenever the market warms up.

In this complex economic environment, the Fed’s monetary policy trajectory has far-reaching implications for the cryptocurrency market

As the Fed navigates policy changes and clearly states its position on Bitcoin, market participants must adopt a more cautious approach in evaluating and responding to potential volatilityDespite potential near-term adjustments, the long-term outlook for the cryptocurrency sector remains promising, with myriad growth opportunities ahead.

Investors should remain vigilant regarding shifts in Fed policy, global economic trends, and advancements in cryptocurrency technology to make informed investment choicesWith ongoing technological progress and an evolving regulatory landscape, cryptocurrencies may increasingly assume a prominent role within the future financial systemHowever, before reaching that point, the market requires greater stability, transparency, and a comprehensive understanding and acceptance of digital currencies.

For the Federal Reserve, balancing the flexibility and foresight of monetary policy while ensuring financial stability will be critical in shaping future policy decisions