Bitcoin (BTC) Price Analysis: BTC Dips Below $100K as Market Volatility Follows Fed Chair Jerome Powell's Remarks on 2025 Interest Rate Cuts and Monetary Policies

As Christmas and New Year's Day 2025 approach, Bitcoin volatility following Federal Reserve Chairman Jerome Powell's remarks on 2025 interest rate cuts and monetary policies. Check out the macro and crypto analysis by the Pintu trader team below.

As Christmas and New Year’s Day 2025 approach, Bitcoin volatility followed Federal Reserve Chairman Jerome Powell’s remarks on 2025 interest rate cuts and monetary policies.

Here's a macro and crypto analysis by the Pintu trader team.

Market Analysis Summary

Macroeconomic Analysis

Fed Funds Rate

Markets anticipated the Fed's 25-basis-point rate cut, bringing the target range to 4.25%-4.50%. However, Powell's comments hinted at a possible shift to rate hikes next year.

This "hawkish cut" led to a swift market response: the dollar surged to a two-year high, stocks fell sharply, and Treasury yields spiked. While markets can overreact on such days, the Fed's statement, revised projections, and Powell's remarks provided ample reasoning for these movements.

One key factor was the lack of unanimity in the decision, with Cleveland Fed President dissenting. Powell also described the rate cut as a “closer call” compared to recent decisions and noted that monetary policy is now “significantly less restrictive” and approaching “neutral.”

Policymakers raised their median inflation outlook for 2025 to 2.5% (up from 2.1%), increased the long-run neutral interest rate to a six-year high of 3.0%, and reduced the number of projected rate cuts next year from four to two. Despite these revisions, rates markets are skeptical, pricing in only 35 basis points of cuts next year and virtually no additional easing thereafter, essentially challenging the Fed's projections.

This skepticism stems from an apparent inconsistency in the Fed's outlook: it expects inflation to remain higher than previously forecast yet plans to cut rates. Powell faced tough questions on this logic during his press conference, as the stance appears harder to justify given the Fed's relatively stable projections for economic growth and employment, which are expected to remain strong through 2026.

Just a year after Powell's dovish pivot, markets are now entertaining the prospect of a hawkish reversal.

Interest rate markets currently anticipate an extended pause, with the next rate cut not fully priced in until September 2025. However, external factors, such as the return of President-elect Donald Trump and potential tariff-driven inflation, could complicate the Fed's plans. Economist Phil Suttle predicts that rising inflation in the second quarter of 2025 might force the Fed to hike rates by July.

Although Powell dismissed the idea of a rate hike next year as unlikely, recent financial market movements suggest otherwise. The dollar has risen 8% since the Fed's first rate cut in September, and Treasury yields have climbed 80 basis points, indicating that parts of the financial market are already bracing for tighter policy.

Other Economic Indicators

BTC Price Analysis

The broader cryptocurrency market remains volatile, with BTC experiencing a significant setback. The leading cryptocurrency recently dipped below the $100,000 mark amid heightened selling pressure across financial markets, including digital assets. This decline closely followed the Fed's decision to cut interest rates and Fed Chair Jerome Powell's subsequent remarks.

BTC had previously rallied strongly following Trump's victory in the U.S. presidential election, with hopes of a pro-crypto regulatory environment under the new administration. Institutional interest also surged, as evidenced by substantial inflows into the BTC ETF.

However, this week's downturn has raised concerns. BTC's fall below $100,000 signals widespread selling pressure amid macroeconomic uncertainty and heightened financial market volatility.

The Fed recently announced a 25-basis-point rate cut, aligning with market expectations and providing short-term optimism. However, comments from Jerome Powell tempered sentiment. Powell indicated the Fed might slow the pace of rate cuts in the coming year. Moreover, the Fed halved its projected number of rate cuts for 2025, reducing them from four to two, further dampening market confidence and contributing to Bitcoin's sell-off.

Despite this short-term pullback, analysts remain optimistic. Many believe BTC is positioned for a recovery, citing positive market developments. For instance, reports suggest the U.S. is considering establishing a Bitcoin Strategic Reserve, boosting investor confidence. Similarly, EU leaders are exploring similar initiatives, which could further support market sentiment.

Overall, while short-term volatility persists, underlying market developments and institutional support suggest potential for Bitcoin’s recovery in the near future.

Bitcoin is currently trading at its 21-day EMA, which aligns with the $100K price level. This pullback serves as a much-needed correction following its aggressive rally over the past month. The key resistance level lies at $106K; a clear breakout above this resistance could position BTC to enter a new price range.

On-Chain Analysis

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