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Bitcoin’s Price Plummets Below $93,000 as Santa Claus Rally Fails to Materialize
Less than a week ago, the leading cryptocurrency traded hands above $108,000, rising to a record price as the holiday season approached. However, a hawkish Federal Reserve dented the asset’s price by voicing a more cautious approach to rate cuts next year.
What’s Driving the Price Drop?
Lower interest rates tend to be favorable for Bitcoin and other “risk assets” like equities. As borrowing becomes cheaper, investors typically seek riskier assets that could produce better returns than the payouts that come with holding safer ones like cash and U.S. Treasuries.
When the Fed lowered its benchmark interest rate by 25 basis points to a target range of 4.25% to 4.5% last week, policymakers signaled there would be fewer rate cuts next year than investors had previously anticipated. Among Fed officials, a majority foresaw two rate cuts next year, down from four rate cuts projected by the U.S. central bank’s officials in September.
Inflation and the Fed’s Response
Inflation has slowed drastically since peaking at 9.1% year-over-year in June 2022, per the U.S. Bureau of Labor Statistics’ Consumer Price Index. Clocking in at a 2.7% increase in the 12 months through November, the latest report showed inflation still running above the Fed’s 2% target.
Since the Fed began cutting interest rates in September, a 100 basis-point reduction in the U.S. central bank’s benchmark rate has given policymakers more wiggle room, Powell explained.
What’s Next for Bitcoin and Other Cryptocurrencies?
As market participants have mulled the Fed’s hawkish tone, Bitcoin’s price has fallen 13% over the past week, while Ethereum and Solana’s have respectively tumbled 18% and 15% to $3,300 and $186, over the same period, according to CoinGecko data.
Among altcoins, XRP’s price has held up slightly better, notching a 12% drop to $2.18 over the same span. As meme coins have been hit hardest by the recent market rout, Dogecoin’s price has dropped 22% to $0.31 over the past week.
Conclusion
While the crypto market will likely see less trading activity through the rest of the year, that doesn’t mean investors should hang their hats up on Santa’s prospects, according to BRN analyst Valentin Fournier.
“With institutional activity expected to decline and retail trading volumes anticipated to remain subdued during the final two weeks of the year, volatility should continue to decrease,” he wrote in a Monday note. “While the ongoing negative momentum could lead to small losses, a sharp rebound remains possible.”
FAQs
What is the current price of Bitcoin? Bitcoin’s price has fallen below $93,000.
What is the current price of Ethereum and Solana? Ethereum’s price has tumbled 18% to $3,300, while Solana’s price has fallen 15% to $186.
What is the current price of XRP? XRP’s price has held up slightly better, notching a 12% drop to $2.18.
What is the current price of Dogecoin? Dogecoin’s price has dropped 22% to $0.31.
What is the outlook for the crypto market? Despite the recent market rout, BRN analyst Valentin Fournier believes a sharp rebound remains possible.
What is the current inflation rate? Inflation has slowed drastically since peaking at 9.1% year-over-year in June 2022, with a 2.7% increase in the 12 months through November.
What is the current interest rate? The Fed’s benchmark interest rate is set at a target range of 4.25% to 4.5%.
