Simply put
- Bitcoin dipped by 1.4%, settling around $92,000, whereas Ethereum showed slight movement upward after the Federal Reserve announced a 0.25% cut in its benchmark interest rate on Wednesday.
- The Fed hasn’t promised any future cuts and plans to start purchasing short-term Treasury bills to uphold reserve levels.
- Following the announcement, traders gauged only a 22% likelihood of another rate cut occurring in January.
Bitcoin and Ethereum saw price shifts on Wednesday after the Federal Reserve’s decision to lower its benchmark interest rate and restart purchases of Treasury bills.
It’s interesting to note that the Fed’s choice wasn’t unanimous—two members of the committee preferred to keep rates steady, while another pushed for additional cuts.
After the Fed’s announcement, Bitcoin was trading around $92,000, a 1.4% decline from the previous day, according to data from crypto price aggregators. Meanwhile, Ethereum saw a small rise of 0.6%, trading slightly over $3,300, while Solana fell by 3.2% since yesterday.
In the statement released post-meeting, the Fed didn’t definitively indicate further rate cuts would happen in the upcoming year, mentioning that it would “carefully evaluate future data, the evolving outlook, and the balance of risks.”
Nonetheless, the FOMC did confirm it would recommence purchases of short-term Treasuries.
“The Committee determines that reserve balances have reached a sufficient level and will begin buying short-term Treasury securities as necessary to ensure a stable supply of reserves,” stated the FOMC.
In its latest forecasts on the economy and interest rates, officials hinted at possibly two more cuts, but opinions vary widely, with one forecast suggesting as many as six 0.25% reductions next year.
“It’s not surprising that the U.S. central bank didn’t commit to reducing borrowing costs soon, especially with worries about a weakening job market and ongoing inflation,” commented Fabian Dory, chief investment officer at Signum Bank.
This decision on Wednesday was taken without some government data due to the recent shutdown, which delayed the November Consumer Price Index report until December 18 and left last month’s employment figures unreported.
Additionally, last week’s ADP National Employment Report indicated that 32,000 jobs were cut last month, and it suggested job creation might be stagnant in the latter half of 2025.
Central banks find themselves in a tricky situation. If they cut interest rates too quickly, it could lead to increased price pressures from tariffs. Conversely, a slow adjustment might prolong the downturn in the labor market, risking a recession.
Still, the Fed’s rate cut was largely anticipated. Before the meeting, traders had estimated an 89% probability that the Fed would proceed with a 0.25% cut across three successive meetings.
On the same day, President Trump was reportedly weighing his options for the next chair of the Fed. Kevin Hassett, who leads the National Economic Council, appears to be the frontrunner, though interviews for candidates are just beginning.
In a recent interview, Trump hinted that candidates’ readiness to cut rates might be a primary criterion for selection. Even though the Fed has shown restraint on cutting rates, Jerome Powell’s term as Chairman expires in May.
“A strong pro-crypto Fed chairman could speed up blockchain’s inclusion in the banking system,” noted analysts at investment bank Compass Point, referring to Hassett’s report on digital asset regulation.
According to Myriad, as of Wednesday, Hassett had a 73% probability of being named Powell’s successor by March.
Throughout his second term, Trump has urged Powell to lower interest rates, with the initial cut of the year occurring in September. The Fed had previously anticipated that trade and immigration changes might complicate efforts to tackle inflation, with further cuts continuing into October.
This past Tuesday, Trump expressed his frustration with Powell, labeling him a “bad Fed chief” during a speech about Pennsylvania’s economy, and he also questioned the legitimacy of Biden’s nominees, implying they too might face dismissal.
