Bitcoin Hits $100,430 After Record High, But Powell's Rate Cut Caution Rattles Crypto Market

Bitcoin, the largest cryptocurrency by market cap, experienced a sharp 5% drop in the past 24 hours, falling to $100,430 after briefly hitting a new all-time high of $108,000 earlier in the week.

The Federal Reserve’s decision to cut interest rates by a quarter point was largely anticipated by markets, but a statement from Fed Chair Jerome Powell indicating a cautious approach to further rate cuts in 2025 appeared to spook investors, leading them to sell off high-risk assets like cryptocurrencies and U.S. equities.

Bitcoin, the largest cryptocurrency by market capitalization, saw a sharp 5% drop in the past 24 hours, falling to $100,430 after briefly hitting a new all-time high of $108,000 earlier in the week. The downturn came as part of a broader market unease following Powell’s comments, which erased gains from three consecutive days of record-breaking highs.

The price of XRP took an even steeper dive, dropping by 10% in the past 24 hours after a brief spike following Tuesday’s price surge. Similarly, Dogecoin saw a sharp decline of 9%, falling to $0.363, marking a monthly low for the top meme coin.

The rate decision led to a cascade of liquidations as traders who had bet on further bullish price moves were caught off guard by the market shift. According to data from CoinGlass, over $690 million in futures positions were liquidated in the past 24 hours, with the majority being long bets. At one point, a staggering $300 million in futures positions were liquidated in just one hour.

Cryptocurrencies like Bitcoin have historically performed well in low-interest-rate environments, much like equities, due to the increased appetite for risk and liquidity. However, the Federal Reserve’s aggressive rate hikes in 2022, aimed at combating post-pandemic inflation, dampened the appeal of Bitcoin and similar assets.

This week’s moderate 25-basis-point rate cut signaled a shift in strategy, but Powell’s statement—“We can therefore be more cautious as we consider further adjustments to our policy rate”—left markets on edge, as it raised concerns about the pace of future monetary easing.

Despite Wednesday’s slump, Bitcoin’s recent rally to an all-time high of $108,000 highlighted its growing role in financial markets. Notably, some prominent figures, including former President Donald Trump and other Republicans, have proposed the idea of the U.S. holding Bitcoin in its strategic reserves—a move that, while speculative, further attests to the cryptocurrency’s increasing legitimacy.

Earlier this year at the New York Times DealBook Summit, Powell said that Bitcoin is more comparable to gold than to the U.S. dollar, emphasizing its role as a speculative asset rather than a reliable store of value. “Bitcoin is not a competitor for the dollar; it’s really a competitor for gold,” Powell said. However, he dismissed the notion of the Federal Reserve holding Bitcoin, stating, “The Federal Reserve is not permitted to own Bitcoin, nor are we seeking a change in the law.”

The volatility following Powell’s remarks highlights the delicate balance that central banks must strike in managing monetary policy without unsettling financial markets. As Bitcoin continues to establish its presence in the mainstream, comparisons to gold are apt, reflecting its growing stature, but its highly speculative nature keeps it closely tied to market sentiment and macroeconomic shifts.

For now, the crypto market remains at the mercy of cautious monetary policy, with its next moves likely dictated by the Fed’s broader strategy in 2025.