Crypto Selloff Widespread Following Fed Rate Cut Expectations
Crypto asset prices slid on Thursday, building on Wednesday’s market-wide selloff triggered by Federal Reserve Chair Jerome Powell’s disappointing comments on U.S. interest rate cut expectations for next year.
Market Reacts to Fed Rate Cut Expectations
Bitcoin’s (BTC) attempt to bounce back above $100,000 earlier in the day quickly faded, sliding to the low-$97,000s during the U.S. day. It modestly recovered to around $98,000 before another leg lower brought prices below $96,000, down 4.8% over the past 24 hours.
Altcoins Take a Hit
Altcoins fared much worse, with the broad-market CoinDesk 20 Index diving more than 10% during the same period. Ethereum’s ether (ETH) dipped 10.8% to below $3,500, while Cardano’s ADA, Chainlink’s LINK, Aptos’ APT, Avalanche’s AVAX, and Dogecoin’s DOGE all suffered 15%-20% losses. Notably, SOL sank to its weakest price since November 7, nearly erasing its post-election rally following a 26% plunge from its record high hit less than a month ago.
Leveraged Positions Suffer Losses
Over the past 24 hours – roughly since yesterday’s rate decision by Fed policymakers – nearly $1.2 billion worth of leveraged crypto derivatives trading positions have been liquidated across all assets, CoinGlass data shows. Over $1 billion of those were long positions, or bets that prices would rise.
Traditional Markets React to Rate Cut Expectations
In traditional markets, U.S. stock indexes slightly bounced from Wednesday’s lows but gave back part of the pre-market gains during the session. The S&P 500 and the tech-heavy Nasdaq were 0.5% up from the Wednesday close.
Market Commentary
"The crypto market has already been on pins and needles around the possibility for a correction following the record run in the price of bitcoin through $100,000," said Joel Kruger, market strategist at LMAX Group. "We got that catalyst from the world of traditional markets. … Fallout from Wednesday’s Fed decision was simply too much to ignore."
"When you zoom out and consider the year-over-year growth, a pullback like this feels healthy," added Azeem Khan, co-founder and COO of layer-2 network Morph. "It’s also worth noting that, historically, year-end selloffs in securities can occur as investors offset losses against gains to lower their tax liabilities. While it’s hard to say how much of this is driving the current trend, it could be a contributing factor."
Conclusion
The crypto market’s recent selloff is a clear indication of the market’s sensitivity to external factors, particularly the Fed’s rate cut expectations. As investors navigate this volatile landscape, it is essential to keep a long-term perspective and avoid making emotional decisions based on short-term market fluctuations.
FAQs
Q: What triggered the recent crypto selloff?
A: Federal Reserve Chair Jerome Powell’s comments on U.S. interest rate cut expectations for next year.
Q: How did the crypto market react?
A: Crypto asset prices slid, with Bitcoin (BTC) falling 4.8% and altcoins experiencing losses of 10%-20%.
Q: What is the impact on traditional markets?
A: U.S. stock indexes slightly bounced from Wednesday’s lows but gave back part of the pre-market gains during the session.
Q: What is the outlook for the crypto market?
A: The market’s recent selloff is a correction, and investors should maintain a long-term perspective and avoid making emotional decisions based on short-term market fluctuations.
