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Bitcoin Decline Amid Fed's Hawkish Stance

Explore the recent decline in Bitcoin prices influenced by the Federal Reserve's hawkish outlook and global crypto market trends.
Published on 2024-12-19

Bitcoin Slips on Fed's Hawkish Outlook

Bitcoin experienced a decline as the U.S. Federal Reserve's hawkish stance on monetary policy raised concerns about tighter conditions. This outlook reduced risk appetite, causing Bitcoin to fall 2.6% to $101,153. Despite reaching an all-time high earlier in the week, the cryptocurrency faced pressure from the Fed's signaling of a slower pace for future interest rate cuts.

Impact on Broader Markets

The Fed's decision to support only two rate cuts in 2025, a reduction from previous expectations, suggests a prolonged period of elevated borrowing costs. This cautious approach has affected speculative assets, including cryptocurrencies, leading to declines in broader risk-driven markets, with Wall Street also experiencing steep drops.

Federal Reserve's Stance on Bitcoin

Fed Chair Jerome Powell clarified that the central bank would not stockpile Bitcoin, emphasizing that such decisions are for Congress to consider. This statement came amidst discussions about a potential Strategic Bitcoin Reserve, an idea floated by incoming President Donald Trump. However, regulatory challenges and lack of clarity on implementation have cast doubt on this initiative.

El Salvador's Bitcoin Policy Reversal

In a notable development, El Salvador's President Nayib Bukele agreed to scale back Bitcoin's adoption as national currency to secure a $1.4 billion loan from the International Monetary Fund. This move marks a shift away from Bukele's earlier Bitcoin ambitions, although the country's crypto holdings have appreciated significantly after recent price rallies.

Altcoins Follow Bitcoin's Decline

Following Bitcoin's downturn, other cryptocurrencies also faced declines. Ether dropped 4.7%, while XRP fell by 5.6%, with Solana, Polygon, Cardano, and Dogecoin experiencing similar losses. This cautious trading environment comes after the Fed meeting, impacting the crypto market's momentum.

Hong Kong's Regulatory Progress

Despite the challenging market conditions, Hong Kong's securities regulator approved four cryptocurrency exchanges, reflecting the region's commitment to becoming a competitive hub for digital asset trading. This initiative highlights ongoing global efforts to adapt to the evolving crypto landscape.

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