Bitcoin (BTC) Retreats to $97K Following Federal Reserve’s Hawkish Stance

TLDR

Bitcoin price dropped below $98,000 following the Federal Reserve’s more hawkish than expected policy outlook
Fed projects fewer interest rate cuts in 2025 than previously indicated
Bitcoin fell from near record levels to $97,000, with a brief recovery above $102,000
Other cryptocurrencies including Ethereum saw declines of 5% or more
Market participants are recalibrating expectations based on Fed’s stance on maintaining tighter monetary conditions

Bitcoin’s price experienced a sharp decline to $97,000 on Thursday as markets processed the Federal Reserve’s latest policy announcement. The move came after the central bank delivered its anticipated quarter-point rate reduction but surprised investors with a more conservative outlook for future cuts.

The cryptocurrency market had been riding high in recent weeks, with Bitcoin approaching record levels. However, the Federal Reserve’s updated projections for 2025 showed fewer planned rate reductions than previously indicated, causing a broad market adjustment.

Trading activity intensified immediately following the Fed’s announcement. Bitcoin’s price quickly moved below the $100,000 mark, though it managed to recover briefly above $102,000 before settling around $97,000 during afternoon trading sessions.

The Federal Reserve’s quarter-point reduction to its benchmark interest rate had been widely expected by market participants. However, the accompanying policy statement and economic projections painted a picture of a central bank determined to maintain a measured approach to monetary policy.

Fed Chair Jerome Powell’s comments during the post-meeting press conference reinforced this cautious stance. Powell emphasized the importance of maintaining control over inflation while acknowledging the progress made in recent months toward the Fed’s long-term goals.

The impact of the Fed’s announcement extended beyond Bitcoin. Ethereum, which holds the second-largest market capitalization in the cryptocurrency space, recorded a decline exceeding 5%. This movement highlighted the broader market’s sensitivity to monetary policy decisions.

Other cryptocurrencies experienced even steeper declines. Several major altcoins saw double-digit percentage drops as traders adjusted their positions. The so-called “meme” tokens, typically more volatile than established cryptocurrencies, faced particularly sharp selloffs.

Market analysts pointed to the relationship between interest rate expectations and cryptocurrency valuations. Higher interest rates traditionally make speculative assets less attractive to investors, as the opportunity cost of holding non-yielding assets increases.

Trading volumes across major cryptocurrency exchanges surged during the price movement. This increased activity reflected the market’s rush to reposition portfolios in light of the Fed’s updated policy path.

Technical analysts noted several key price levels that came into focus during the decline. The $100,000 mark served as a psychological barrier, while the $97,000 level emerged as a point of price stability during the afternoon trading session.

The cryptocurrency market’s reaction appeared more pronounced than that of traditional financial markets, though stocks and other risk assets also showed sensitivity to the Fed’s announcement. This heightened reaction in crypto markets underscored the sector’s continued correlation with broader monetary policy shifts.

Derivatives markets also reflected the changing sentiment. Bitcoin futures contracts saw increased trading activity, while options markets registered growing demand for downside protection.

Historical data suggests that Bitcoin has often displayed volatility around Federal Reserve policy announcements. However, the scale of this move caught some market participants off guard, given the recent strength in cryptocurrency prices.

Market makers reported that liquidations of leveraged positions contributed to the price movement. As Bitcoin’s price declined, automated trading systems triggered the closure of long positions, adding to the downward pressure.

The price movement occurred against a backdrop of strong institutional interest in Bitcoin. Recent months had seen increased adoption by traditional financial institutions, though this trend appeared temporarily overshadowed by the immediate market reaction to the Fed’s stance.