BTC sharply dropped to $100,000 after Fed Chair Jerome Powell's hawkish signal for 2025 triggered a selloff in risk assets despite the current 25 basis point rate cut. Will sustained demand from Bitcoin ETFs and optimism about the crypto market's prospects under the Trump administration be enough to keep the BTC exchange rate in the six figures?
The Fed's cautious approach suggests sustained higher rates may persist through 2025, challenging the narrative of swift monetary easing to fuel rallies in risk assets and the crypto market.
The U.S. Federal Reserve began cutting interest rates in September as inflation eased and unemployment ticked up. Investors saw Wednesday’s cut. However, Powell referred to it as a “closer call,” hinting the central bank nearly held steady.
"Inflation has made progress toward the Committee's 2% objective but remains somewhat elevated." — (Federal Reserve FOMC statement)
Three rate cuts vanish from the 2025 outlook: officials now project two reductions instead of five. Now, markets must recalibrate expectations as the Fed maintains a cautious approach to inflation management.
On Tuesday, CME Group's FedWatch tool showed an 81% chance of a 0,25% rate cut in January, with less than 2% for no cut at all. The odds flipped after Powell's Wednesday press conference: 91% predicted rates would hold steady, with quarter-point cut probability dropping to 9%.
Analysts argue, however, that fears about sustained high rates impacting Bitcoin may be exaggerated, considering the current market conditions.
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Amid persistent passive demand from Bitcoin spot ETFs and MicroStrategy's inclusion in the Nasdaq-100, Trump's implied commitment to stimulating economic growth at any cost suggests a positive outlook for risk assets, as market watchers note.
Moreover, during his election campaign, Trump pledged to protect crypto mining, even create a Bitcoin reserve, and aim to make the U.S. the "crypto capital" of the world. He is also expected to develop targeted crypto policies to address long-standing industry demands.
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However, this does not mean traders should not be prepared for 'healthy' 20% corrections, which would look much more like a dip worth buying in a strong bull market.
In addition to this generally bullish outlook and Bitcoin spot ETF recently surpassing gold ETFs in terms of assets under management, Bloomberg analysts expect 'a wave of crypto ETFs' next year, with Litecoin, Hedera, Solana, and XRP funds on the horizon, as new leadership takes over at the SEC.
The first altcoin ETFs are expected to be a combination of BTC and ETH, followed by Litecoin and Hedera, as the SEC has not classified $LTC and $HBAR as securities, positioning them favorably for ETF approval.
Although XRP and Solana ETF proposals have already been filed, there is little hope for approval before a new SEC chair is appointed under Trump's administration. Meanwhile, ongoing securities-related regulatory scrutiny may delay XRP and Solana ETFs until 2026.
Even Dogecoin ETF filings are on the table in 2025. Or do you think our brave new world is not crazy enough for that yet?
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