The Bitcoin rally linked to Trump is slowing down. Now, experts are shifting their focus to the Federal Reserve and what it might mean for prices.
After a big jump of 36% in Bitcoin's price following the U.S. election, the excitement has cooled. The attention has moved away from Trump and onto monetary policy. Jerome Powell, the chair of the Federal Reserve, has raised concerns about inflation. He mentioned that the central bank will cut interest rates, but at a slower pace. This means Bitcoin might have to wait until next year for another boost. Investors should be ready for some ups and downs in the meantime.
Cory Klippsten, the CEO of Swan Bitcoin, shared his thoughts: “For Bitcoin, we’re in the early stages of what looks like a massive bull run. Expect pullbacks of 20 to 40% along the way, but trying to time the top is a fool’s errand.”
At the latest Fed meeting, Powell pointed out that while inflation has dropped from its peak, it’s not over yet. Consumer prices showed a small rise of 0.2% year-over-year, the first increase in seven months. This indicates that inflation is still a concern. On top of that, strong employment numbers suggest the economy is doing well. Powell concluded, “The economy is not sending any signals that we need to be in a hurry to lower rates.”
The capital markets reacted quickly to these comments. This shift in tone marks a change from the Fed’s previous aggressive rate-cutting cycle that began in September. After Powell spoke, the S&P 500 fell by 1%, the NASDAQ dropped by 2%, and Bitcoin also lost 2%.
Greg Magadini, who directs derivatives at Amberdata, noted, “Good news turned into bad news when the Fed stated it’s too early to determine whether it will cut rates at its December meeting.”
Furthermore, Trump’s recent appointments have added to market uncertainty. Steven Lubka, head of Swan Bitcoin’s institutional investment arm, mentioned that unexpected choices, like naming Matt Gaetz as attorney general, have turned heads and added confusion.
Despite these factors, the overall sentiment in stocks and crypto remains very positive, especially for cryptocurrencies. Carlos Guzman, an analyst at GSR, emphasized, “It’s hard to overstate how much of a shift it is as we’re going from an actively hostile administration to the most crypto-friendly administration the U.S. has seen.”
The President-elect’s pick for Treasury Secretary is weighing heavily on crypto investors. Kevin Warsh, a former Fed official, is currently the leading candidate in betting markets. The odds for crypto supporters like Howard Lutnick, CEO of Cantor Fitzgerald, and Scott Bessent, founder of Key Square Group, have dropped significantly in the last day.
Guzman is keeping an eye on whether Trump will follow through on his campaign promises, especially the idea of setting up a Bitcoin reserve for the country. He said, “While we still assign a low probability to this happening, we don’t think it is out of the question given Trump’s campaign promises and Senator Lummis’ active support for its creation. If enacted, the sky could be the limit for Bitcoin prices, and altcoins could follow suit.”