Bitcoin has remained steady amidst global equity market turmoil following the Federal Open Market Committee (FOMC) meeting on December 18. While global equity market indices have experienced a slight downturn, Bitcoin has held steady, trading in the mid-$90,000 range at the time of writing.
The US Federal Reserve (Fed) initiated rate cuts in September after over a year of consecutive interest rate hikes, reducing rates by 50 basis points. This move sparked optimism in both crypto and equity markets, which rallied in anticipation of a dovish monetary policy favorable to risk-on assets. However, a report by K33 Research has cast doubts over regular rate cuts following the December 18 FOMC meeting, as Fed chairman Jerome Powell hinted at a slower pace of monetary easing in 2025.
The Fed’s decision to go slow with interest rate cuts is largely due to potential inflationary pressures associated with Trump’s presidency. As a result, the S&P 500 has dropped 2.55% over the past month. Despite this pullback in equities, Bitcoin has shown resilience, reflecting its status as an emerging asset class.
Vetle Lunde, Head of Research at K33 Research, commented on the recent downturn, attributing it to the December 18 FOMC meeting. Lunde noted that global de-risking has occurred in the past two weeks, with Bitcoin facing negative two-week returns of 11%. However, Lunde emphasized that a drop of 11% in Bitcoin’s price is relatively modest in the context of its historical performance, as pullbacks ranging from 20% to 30% are common during bull runs.
Lunde also highlighted that Bitcoin’s 30-day correlation with the Nasdaq has climbed above 0.5 for the first time since September, indicating that Bitcoin is increasingly mirroring the movements of traditional tech-heavy equity markets.
Despite the Fed cutting interest rates by 100 basis points since September, markets remain cautious about persistent inflation, as evidenced by the rise in 10-year Treasury yields. Crypto entrepreneur Arthur Hayes has forecasted a potential “harrowing dump” in Bitcoin’s price around Trump’s inauguration, with on-chain analysis suggesting a sharp correction to $80,000.
However, many industry experts maintain that Bitcoin’s long-term bullish outlook remains intact. At the time of writing, Bitcoin is trading at $94,805, up 2.6% in the past 24 hours. The market continues to monitor developments closely as Bitcoin navigates through the current economic uncertainties.