Bitcoin and Cryptocurrency Markets Face Turbulence Amid Federal Reserve's Hawkish Stance
Bitcoin's Decline Amid Macroeconomic Pressures
Bitcoin has experienced a notable retreat, marking its third consecutive day of declines. The downturn comes as macroeconomic pressures, driven by the Federal Reserve's hawkish stance, contribute to market instability. Bitcoin's value decreased by 3.7%, dropping below the $100,000 mark following the Fed's indication of a slower pace of rate cuts in 2025.
Profit-Taking and Uncertain Outlook
The recent all-time high of Bitcoin was short-lived as profit-taking and an uncertain macroeconomic outlook led to a sell-off. This was further exacerbated by the Fed's forecast of only two interest rate cuts in 2025, contrary to previous expectations of four. The central bank's position has diminished the attractiveness of speculative assets like cryptocurrencies due to reduced liquidity.
Regulatory Concerns and Strategic Bitcoin Reserve
Fed Chair Jerome Powell's remarks on the lack of intention to participate in government-led Bitcoin initiatives have fueled doubts about a Strategic Bitcoin Reserve. Regulatory challenges remain a significant hurdle, as highlighted by former President Donald Trump's suggestion of a Bitcoin reserve.
El Salvador's Continued Bitcoin Purchases
Despite the International Monetary Fund's (IMF) warnings, El Salvador plans to continue its Bitcoin purchases. This follows a financing agreement with the IMF, where President Nayib Bukele agreed to scale back Bitcoin's role in the national economy for a $1.4 billion loan. Despite reduced global market access due to its Bitcoin focus, the country's holdings have increased in value amid recent crypto rallies.
Altcoins Suffer Amid Crypto Market Downturn
Altcoins have experienced sharper declines compared to Bitcoin, as traders react to the Fed's hawkish approach. Ether, the second-largest cryptocurrency, has slumped significantly, along with other major altcoins like XRP, Solana, Polygon, Cardano, and Dogecoin, reflecting a challenging week for the broader cryptocurrency market.
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