Bitcoin and other cryptocurrencies face steep declines after Federal Reserve comments and market jitters from BlackRock predictions, Forbes reports.
The cryptocurrency market experienced a significant downturn as Bitcoin’s price plummeted, dragging the broader market down and wiping out approximately $500 billion in value. The decline came after the US Federal Reserve issued a warning about persistent inflation and BlackRock’s market outlook spooked investors.
The price of Bitcoin dropped by around 10% over 24 hours, reaching close to $90,000 per Bitcoin. Ethereum, Solana, Dogecoin, and other top cryptocurrencies suffered even sharper declines, with some experiencing losses of 15% to 25%. The broader crypto market, which had recently been valued at $3.2 trillion, saw its total market capitalization fall significantly.
The primary driver of the crypto sell-off was a “wake-up call” from Federal Reserve Chair Jerome Powell. He warned that inflation would remain a persistent challenge in the coming year, leading the central bank to scale back its planned interest rate cuts for 2025. Initially, the Fed had anticipated four rate cuts in 2025, but Powell’s announcement reduced that number to just two.
“Comments from the Federal Reserve were a wake-up call,” said Danni Hewson, head of financial analysis at AJ Bell. “Inflation is proving sticky, and tax cuts and tariffs could be a recipe for reflation. Risk appetite has been pared back. Trump 2.0 is a known unknown, and no one wants to be overexposed if the climate proves inhospitable.”
The shift in the Federal Reserve’s outlook has heightened investor uncertainty, especially in risk-sensitive markets like cryptocurrency.
Alongside the Federal Reserve’s warning, BlackRock also played a role in rattling market confidence. While specific details of BlackRock’s projections remain under wraps, industry observers suggest that the firm’s outlook on financial markets, especially on crypto investments, contributed to the market pullback.
Historically, BlackRock’s views have been closely watched by both institutional and retail investors. Any shift in its analysis often prompts changes in market sentiment.
Market analysts are warning of more turbulence in the weeks and months ahead. Nick Forster, founder of decentralized finance (DeFi) protocol Derive, expects heightened volatility for both Bitcoin and Ethereum as 2025 approaches.
“Expect to see volatility levels for both Ethereum and Bitcoin increase as we head into early 2025, particularly around the settlement of the December 27, 2025 expiry,” Forster said.
However, he remains optimistic about a recovery later in 2025.
“We’re observing a trend where funds and high-net-worth individuals are moving into options with longer expiries, like those set for September and beyond, reflecting a positive outlook for 2025,” he explained.
Forster noted that open interest in “call” options — which indicate a bet that prices will rise — is outpacing “put” options, a sign that investors are still bullish on the long-term future of Bitcoin and the broader crypto market.
The sell-off in the crypto market mirrored movements in traditional financial markets, with stock prices also seeing declines following the Federal Reserve’s statements. Rising uncertainty around inflation and economic policy is pressuring all risk assets, including equities and cryptocurrencies.
The crypto market, often viewed as a higher-risk investment, has historically reacted more sharply to such economic signals. The combination of Federal Reserve policy shifts, BlackRock’s market projections, and broader financial uncertainty has created a “perfect storm” for the crypto market, leading to the sudden rout.
