The price of Bitcoin experienced a sharp decline on Wednesday, briefly falling to $98,760 before recovering above the $100,000 milestone. This downturn comes as the Federal Reserve’s (Fed) cautious outlook on future rate cuts dampened investor enthusiasm for cryptocurrencies.
Fed’s Cautious Stance Shakes Markets
The Fed reduced borrowing costs for the third consecutive time, but Chair Jerome Powell tempered expectations for additional cuts in 2025, emphasizing that more progress on inflation is needed.
Market analyst Tony Sycamore of IG Australia Pty commented that the Fed’s decision was widely anticipated but served as a catalyst for a pullback in speculative assets, including Bitcoin.
Despite the dip, Bitcoin remains approximately 50% higher since the U.S. elections on November 5, fueled by President-elect Donald Trump’s pro-crypto stance and proposals for a national Bitcoin stockpile.
Key Market Reactions
- Paul Veradittakit, managing partner at Pantera Capital, remains optimistic, stating:”All signs point to a good floor and outlook for Bitcoin.”
- Sean McNulty of Arbelos Markets reported increased demand for options to hedge against further Bitcoin declines.
- Zann Kwan, CIO at Revo Digital Family Office, suggested Bitcoin could temporarily retreat to the low $90,000s before resuming upward momentum.
Technical Analysis: Resistance at $105,400
According to crypto analyst Ali Martinez, Bitcoin’s price movement reflects forward-looking market expectations rather than past events. While the Fed’s 25-basis-point cut was anticipated, its updated 2025 forecast—reducing expected cuts from three to two—caught markets off guard.
The stronger U.S. dollar, which surged to levels last seen in 2022, added further pressure on Bitcoin, as the two assets often exhibit an inverse relationship.
Martinez also highlighted key technical patterns:
- Bitcoin recently broke out of a head-and-shoulders formation, causing the dip below $99,000.
- For Bitcoin to negate a bearish outlook, it must surpass a key resistance level at $105,400.
Inflation and Market Sentiment
Persistent inflationary pressures are adding to market uncertainty. Core CPI is annualizing at 4%, with core PCE nearing 3.5%, signaling inflation may remain a challenge.
Powell’s admission that the rate cut decision was a “closer call” than usual suggests division among Fed officials, further complicating market expectations.
Looking Ahead
Bitcoin’s recent volatility underscores the sensitivity of the crypto market to macroeconomic developments. While the Fed’s cautious stance has introduced headwinds, long-term bullish sentiment—driven by institutional adoption and regulatory clarity—remains intact.
Traders will closely watch the $105,400 resistance level as a critical turning point for Bitcoin’s trajectory.
