The crypto market has seen a significant downturn, wiping out over $850 million due to liquidations. This event followed the Federal Reserve’s announcement of a 25 basis point reduction in its benchmark policy rate.
Although markets were pricing in a modest rate cut, Federal Reserve Chairman Jerome Powell’s indications that he would take a cautious approach to future rate adjustments in 2025 sparked market uncertainty and heavy selling. .
Bitcoin Dip Liquidates Nearly 300,000 Crypto Traders
At a news conference, Powell noted that while inflation has fallen “steadily,” its decline has been “slower than expected.” As a result, the Fed revised its 2025 inflation forecast upward to 2.5%, suggesting a potential tightening of economic conditions that could restrict liquidity in financial markets, including crypto.
“Inflation has progressed toward the Committee’s 2 percent target, but remains somewhat elevated. The economic outlook is uncertain, and the Committee is alert to risks on both sides of its dual mandate,” the Federal Reserve said in a press release.
This change in monetary policy led to a sharp decline in Bitcoin, which fell below $99,000, down more than 8% from its all-time high of $108,000. Likewise, the broader crypto market, including major currencies like Ethereum (ETH), suffered significant losses.
According to Coinglass, in the last 24 hours, a staggering $869.39 million was wiped out in liquidations, with $749.59 million coming from long positions and $119.80 million from short positions. Altcoins in particular were the most affected, representing more than $222 million of assets liquidated.
Amid these market movements, a total of 299,335 traders were caught off guard. The largest liquidation order took place on Binance, involving an Ethereum transaction worth $7 million.
Despite these setbacks, crypto trader sentiment remains surprisingly resilient. The Cryptocurrency Fear and Greed Index is currently at 75, reflecting a strong bullish outlook amid market volatility. This sentiment highlights the continued appeal of cryptocurrencies as an investment, even during turbulent times.
Reinforcing this optimism, Bitcoin-related investment vehicles have seen notable inflows. BlackRock’s iShares Bitcoin Trust, for example, saw $359.6 million in new investments on Wednesday alone. While the combined inflow of all spot Bitcoin ETFs reached $275.3 million.
These developments, which reflect a cautious Federal Reserve and an optimistic crypto market, demonstrate a complex interplay between macroeconomic policies and crypto markets. Investors appear to be hedging themselves against economic uncertainty by increasing their holdings in digital assets which, despite their inherent volatility, are seen as a viable portfolio diversification strategy.
Recent market activity highlights the influence of US monetary policy on the crypto sector. As the Federal Reserve continues to address inflation-related challenges, the crypto market’s response remains swift and pronounced.
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