Bitcoin Rises Toward $100,000 After Fed-Triggered Dip, Worst Performance Since September

Bitcoin has fallen below $100,000 amid a wider downturn in speculative investments, following the Federal Reserve’s announcement hinting at increased caution on future interest rate reductions.

As of 10 a.m. Thursday in Singapore, the cryptocurrency dropped around 1% to $99,800, following a significant decline of 5.1% on Wednesday, its largest decline since September. Other cryptocurrencies, including Ether, XRP, and the popular meme-based Dogecoin, also encountered challenges.

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Officials from the Fed have lowered borrowing costs for the third consecutive time but have restricted the number of cuts projected for 2025. Chair Jerome Powell highlighted that further progress on inflation is required before considering additional rate cuts.

According to IG Australia Pty Market Analyst Tony Sycamore in a recent note, the outcomes of the Fed meeting were anticipated by investors monitoring recent US inflation and economic trends. “However, it served as a catalyst to reduce some of the speculative excesses that had surged into risk assets, like stocks and Bitcoin, following the US elections,” he mentioned.

The Fed’s decision strengthened the dollar, negatively impacting global stocks and bonds. Additionally, a dispute over a funding bill heightened concerns about the risk of a partial US government shutdown, contributing to mixed results in US equity futures on Thursday.

Despite the recent volatility, Bitcoin has increased by 50% since the November 5 election, reaching a record high of $108,316 earlier this week, buoyed by President-elect Donald Trump’s intention to eliminate regulatory hurdles for cryptocurrencies in the US. The Republican has also pushed for the establishment of a national strategic reserve for the largest digital asset.

“All signs indicate a strong foundation and a hopeful outlook for Bitcoin,” even though some traders appeared to be disappointed by the Fed meeting and opted to take profits, noted Paul Veradittakit, a managing partner at Pantera Capital.

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Trump’s backing for cryptocurrency has overshadowed concerns related to stretched momentum and the lack of traditional valuation metrics. The previous Biden administration had imposed restrictions on the industry following a substantial market downturn in 2022 that exposed risky practices and fraud.

© 2024 Bloomberg

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