Summary:
Cryptocurrencies fell this weekend due to a hawkish Federal Reserve outlook.
Bitcoin trades around $93,260, down from $102,000 last week.
The Fed now expects only two rate cuts in 2025, impacting market sentiment.
MicroStrategy continues to accumulate Bitcoin, predicting a price of $13 million by 2045.
Expect volatility in the cryptocurrency market as inflation remains a concern.
Cryptocurrencies experienced a downturn this weekend, with investors reacting to a potentially more hawkish Federal Reserve. This shift raises concerns about fewer rate cuts than anticipated in 2025.
Current Market Status
As of Monday afternoon, Bitcoin (CRYPTO: BTC) was trading approximately 4% lower, having dropped significantly over the weekend. After reaching a high of $102,000 last Thursday, it is now around $93,260. Similarly, Dogecoin (CRYPTO: DOGE) decreased by 3.2%, and XRP (CRYPTO: XRP) fell 3.1%.
Macro Economic Outlook
The recent Federal Reserve meeting concluded with a projection of only two rate cuts in the upcoming year, a reduction from the previously anticipated four. This revelation caught many investors off guard and contributed to the market's downward trend.
Despite some good news regarding Stephen Miran, a pro-crypto economist appointed to chair the president's Council of Economic Advisers, the focus remained on the broader economic outlook. Durable goods orders for November fell short of expectations, and rising Treasury yields typically signal bearish trends for cryptocurrencies.
Bitcoin and Inflation
While Bitcoin is often viewed as a hedge against inflation, its performance is influenced by various factors, including the strength of the dollar. As the dollar strengthens, Bitcoin tends to decline, exhibiting an inverse relationship.
Future Expectations
With Bitcoin's substantial rise this year, it is more vulnerable to pullbacks. The market anticipates ongoing volatility as it adapts to inflation trends and interest rate trajectories. Most traders believe inflation will remain above the Fed's 2% target, influenced by Trump's proposed tax cuts and tariffs.
Despite these challenges, MicroStrategy continues to invest in Bitcoin, purchasing 5,262 tokens for $561 million last week. Michael Saylor, the company's CEO, has expressed bullish predictions for Bitcoin, forecasting prices as high as $13 million by 2045.
Summary of Positions
I maintain a favorable view on Bitcoin and suggest a small, speculative position in XRP, while currently having no interest in Dogecoin. With the new year approaching, expect turbulence in the cryptocurrency market as it reacts to economic indicators.
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