Why Bitcoin, Ethereum, and Dogecoin are down today

the Crypto momentum We’ve seen all of fall and early winter hit a major hurdle in the last 24 hours after the Federal Reserve cut interest rates. This may sound like a good thing on the surface, but as part of the cuts, the Fed also said it expects inflation and unemployment to be higher than expected in 2025. Add that up, and investors will be selling risk assets today.

Bitcoin (Bitcoin -2.44%) It is the biggest loser, down 6.2% over the past 24 hours as of 3pm EST and falling below the $100,000 level. Ethereum (Ethereum -5.33%) It fell 9.7% in that time to $3,350 and Dogecoin (Doug -12.40%) It fell by 16.8% to $0.3032.

The Fed’s influence on crypto

To the extent that cryptocurrencies are marketed as a way out of the traditional financial ecosystem, the cryptocurrency market is traded much like traditional risk assets such as growth stocks. In this case, when interest rates rise, growth stocks fall and cryptocurrencies move down with them.

You mentioned that the Fed cut interest rates yesterday, but the market took talk of inflation as a risk to longer-term bonds, and those yields rose after the announcement. According to Bloomberg, 10-year government bonds rose by 6 Basis points On the last day it is now up 64 basis points over the past year.

As we saw in 2022, higher rates mean lower valuations for cryptocurrencies.

FOMO cycle coming to an end?

This current crypto race started after the election when there was an increase in speculation that President-elect Donald Trump would open a bull market for the cryptocurrency market. This may happen, but the gains seen have not been consistent with any fundamental changes in the industry.

Fear of missing out, or FOMO, has sent valuations soaring, and that FOMO may be about to end now.

There has also been speculation that the US government would purchase Bitcoin, in particular, as a reserve or that it could be used as a reserve by other governments. Fed Chairman Jerome Powell has been clear that the Fed is not allowed to buy Bitcoin, which could have caused some disappointment.

This seems similar to the “buy the rumor, sell the news” moment in investing, where there is disappointment when results or news come out, even something as obvious as the Fed not buying Bitcoin.

Questions heading into 2025

Last year’s gains were largely based on speculation and momentum generated by items such as the approval of exchange-traded funds (ETFs) and elections. But in 2025, there may be fewer of these tailwinds and pricing will be driven by the number of new buyers coming into the market, such as Bitcoin.

It’s worth noting that as well Accurate strategy It also declined, and its arbitrage strategy became less plausible without a significant premium. It is also the largest single buyer of Bitcoin on the market, so its multibillion-dollar purchases have been a driver of Bitcoin’s price. As Bitcoin advances, so do cryptocurrencies, which means everything is less today.