Is The Crypto Bull Run Over? Top Exec Discusses The Market Crash
2024-12-19
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The broader crypto market experienced a pronounced downturn following yesterday’s Federal Open Market Committee (FOMC) meeting, held on December 18. After the US Federal Reserve delivered a 25-basis-point rate cut as anticipated, it also signaled fewer cuts in 2025 than previously expected.
In response, the Bitcoin price fell by more than 5%, dropping below the $100,000 mark before showing slight signs of recovery. Altcoins saw across-the-board double-digit percentage declines.
The Federal Reserve’s decision—while meeting expectations for a 25-basis-point reduction—came with a notable shift in the projected rate trajectory for next year. Rather than the previously communicated four cuts, the central bank now anticipates only two, signaling a more cautious stance. This recalibration of future monetary policy sent ripples through the entire risk asset spectrum, prompting the S&P 500 to decline 3% and the Russell 2000 Small Cap Index to drop 4.4%.
Is The Crypto Bull Run Over?
Within the crypto sector, the immediate aftermath was pronounced. Matt Hougan, Chief Investment Officer at Bitwise Asset Management, addressed the market conditions this morning via X, writing: “The big catalyst today was the Fed announcement […] The Fed cut rates by 25 basis points as expected, but lowered expectations for next year from 4 cuts to 2 cuts. Higher rates are bad for risk assets, and the Fed’s announcement caused a sharp pullback in all risk assets.”
According to Hougan, Bitcoin’s price action reflected heightened sensitivity to shifting monetary conditions. He noted that Bitcoin price drop was exaggerated by leveraged positions being liquidated. “$600 million of leveraged long positions were blown out in today’s market, exacerbating the pullback.”
Despite the steep correction, Hougan argued that the broader outlook remains constructive: “Crypto now has internal momentum, and nothing about today’s announcement interrupts the mega-trends: The pro-crypto reversal in Washington policy, rising institutional adoption and ETF flows, Bitcoin purchases by governments and corporations, and major tech breakthroughs in the programmable blockchain space.”
He pointed to technical indicators as a supporting factor for his thesis: “My favorite momentum gauge is still positive: Bitcoin’s 10-day exponential moving average ($102k) is still above its 20-day exponential moving average ($99k).”
Hougan concluded his thread by maintaining that the shift in Fed expectations would not derail the longer-term bull run, stating: “Crypto’s in a multi-year bull market. 50bps of projected rate cuts won’t change that.”
Other market observers offered similar interpretations of the Fed’s communication strategy. Warren Pies, Founder of 3Fourteen Research, commented via X: “By upping inflation forecast, lowering UE rate, and keeping cuts in place, the Fed has actually opened the path to more than 2 cuts in 2025 as data ‘surprises’ to the dovish side.”
Renowned macro analysts echoed this sentiment. Crypto analyst and podcaster Fejau (@fejau_inc) described the central bank’s approach as a strategy designed to guide market expectations: “Fed forced itself into cutting this week so is using a hawkish 2025 FFR dot plot forecast to talk down long bond yields despite cutting today […] Welcome to macro psyop warfare. Smoke and mirrors baby.”
He characterized the dot plots as a tool for psychological influence rather than a strict roadmap: “It’s important to view the dot plots not as a future forecast of events, but as a psychological tool […] The Fed has bought themselves time to allow further data to come out before they actually make a move […] Can almost guarantee you 2025 will not occur as is forecasted in their dots.”
Andreas Steno Larsen, CIO of Steno Global Macro Fund and CEO at Steno Research, offered a similar assessment: “By hawking up all forecasts a lot, the Fed lowers the bar materially for cuts next year. It is a wise move, if you want to cut further, but do not want to precommit.”
At press time, Bitcoin traded at $101,766.