Bitcoin and Cryptocurrencies Fall as Investors Grapple with a Potentially More Hawkish Federal Reserve

The price of Bitcoin (CRYPTO: BTC), the world's largest cryptocurrency, traded about 4% lower from late afternoon but also fell significantly over the weekend.

Cryptocurrencies traded lower this weekend and into today as investors digested the prospect of a more hawkish Federal Reserve, which could lead to fewer rate cuts than hoped for in 2025.

The price of Bitcoin (CRYPTO: BTC), the world's largest cryptocurrency, had fallen about 4% from late afternoon but also fell significantly over the weekend. As of 1:29 p.m. ET on Monday, Bitcoin traded around $93,260 after topping $102,000 last Thursday. The price of Dogecoin (CRYPTO: DOGE) traded 3.2% lower, while XRP (CRYPTO: XRP) had fallen 3.1%.

The macro outlook is key right now.

The Federal Reserve sent the market lower after concluding its final meeting of the year last week. The Fed also disclosed that it now expects only two rate cuts next year instead of the four it projected at its September meeting. While many investors and market pundits seemed to expect this heading into the Fed's meeting, the news surprised the broader market.

Crypto stakeholders got more good news this morning after President-elect Donald Trump appointed Stephen Miran, an economist and former U.S. Treasury Department official, to chair the president's influential Council of Economic Advisers. Moran is pro-crypto.

However, investors seemed more focused on the broader macro outlook. Despite durable goods orders in November coming in below expectations, Treasury yields moved higher, normally a bearish indicator for Bitcoin and crypto overall.

Many people believe that Bitcoin can hedge inflation. But the cryptocurrency moved lower today as Treasury yields rose, and gold also fell. The dollar continued to strengthen, and Bitcoin, as an alternative currency, tends to have an inverse relationship with the dollar.

Bitcoin price data by YCharts

Traders betting on 30-day Fed funds future prices are increasingly counting on the agency cutting rates fewer times than previously expected in 2025. More than 91% of traders think it is set to pause rate cuts at its January meeting, and 37.5% of traders see the Fed doing only one rate cut next year.

Just a week ago, most traders expected two cuts from the Fed next year, although keep in mind that these probabilities can change quickly.

I didn't see much token-specific news this morning, although Michael Saylor's company, MicroStrategy, continues to buy Bitcoin. Last week, the company purchased another 5,262 tokens for $561 million at an average price of $106,662. Saylor has publicly predicted that Bitcoin can soar to $13 million by 2045.

Expect some turbulence heading into the new year.

Bitcoin has risen significantly this year, so it's more susceptible to pullbacks. I expect the token to remain volatile as the market looks for hints about inflation and the trajectory of interest rates.

Most traders now think inflation will be sticky and stay above the Fed's preferred 2% target. Investors and the Fed are also bracing for the potential inflationary impact of Trump's proposed tax cuts and tariffs.

Still, all of this could change direction on a dime with a weak reading of the December jobs report or the Consumer Price Index in early January, which is why I expect volatility to begin next year. XRP and Dogecoin are more volatile than Bitcoin, so the two tokens should experience higher gains and worse losses than Bitcoin.

I like Bitcoin and think XRP warrants a smaller, speculative position. I do not currently have any interest in Dogecoin.