Why is crypto down today? Fed’s hawkish cut triggers sell-off

• The crypto market shed over $300B following the Fed’s hawkish cut. 
• BTC remained resilient above $100K despite dumping by long-term holders. 

On Wednesday, 18th December, the US Federal Reserve adopted a hawkish tone for the 2025 rate cut projection, a move that triggered carnage in traditional and crypto markets. 

Bitcoin [BTC] led the crypto decline as it dropped from a recent lifetime high of $108.3K to a low of $98.8K before rebounding slightly to $101K at press time. But altcoins dumped harder. 

Over the same period, the crypto market cap dropped from $3.77 trillion to $3.46 trillion – A whopping $330 billion was wiped out of the crypto markets in the past 48 hours. 

Source: CoinMarketCap

Fed slows rate cut in 2025

During the meeting, the Fed slashed interest rates again by 0.25% to 4.25%-4.50%. Since September, the Fed has cut the rate by 100bps, an overall boost to risk-on assets, including crypto due to the availability of cheap capital. 

The market expected the Fed rate path to extend to 2025 with another three rate cuts. However, inflation made a comeback with a recent spike of 2.7% on year-to-date (YTD) for the latest November reading. 

This informed the Fed’s slow pace of rate cuts in 2025, dropping them from three to two. Reacting to the same, analyst and market commentator Kobeissi Letter, noted,

“Rather, it would about the Fed’s outlook for 2025 which shifted SHARPLY in the hawkish direction. As seen below, the Fed revised their 2025 outlook from 3 rate cuts to 2 rate cuts, a total of 50 bps.” 

Source: Federal Reserve

Amongst the majors, BTC only dropped 5.5% on Wednesday. But Ethereum [ETH] and Ripple [XRP] dumped 6% and 10% respectively. Solana [SOL] shed 7.45% of its value over the same period. 

Apart from the FOMC-driven sell-off, BTC long-term holders (LTHs) took advantage of the liquidity above $100K and booked profits.

According to analyst James Van Straten, the cohort dumped 40K BTC on Tuesday and has distributed nearly 1M BTC so far. 

Read Bitcoin [BTC] Price Prediction 2024-2025 

On Wednesday, the BTC sell pressure across all exchanges hit $21 billion per CryptoQuant data. But the king coin defended the $100K level.

However, BTC dominance also surged to 58% which could further derail the altcoin momentum. 

Source: CryptoQuant