Cryptocurrency prices plummeted this weekend as investors grappled with the potential for fewer rate cuts from the Federal Reserve in 2025. Bitcoin, the world’s largest cryptocurrency, fell about 4% lower and traded around $93,260 as of Monday afternoon, down from a peak of $102,000 last Thursday.
The Fed’s decision to cut rates only twice next year instead of four was seen as a surprise by many investors, who had expected more rate cuts. However, the macroeconomic outlook is still important, with durable goods orders in November coming in below expectations and Treasury yields rising.
Despite this, cryptocurrency experts believe Bitcoin can hedge inflation. However, the cryptocurrency’s value is also influenced by other factors, such as gold prices, the dollar, and interest rates. Traders are now expecting fewer rate cuts from the Fed in 2025, with over 91% of traders predicting no rate cuts at the January meeting.
Other cryptocurrencies, such as XRP and Dogecoin, were also affected by the market downturn. However, experts expect these coins to be more volatile than Bitcoin, leading to higher gains but also worse losses.
In a related development, President-elect Donald Trump appointed an economist and former U.S. Treasury Department official to chair the Council of Economic Advisers, which could have positive implications for cryptocurrencies. Nevertheless, the overall outlook remains uncertain, with experts warning of potential volatility in the new year.
Source: https://www.fool.com/investing/2024/12/23/why-cryptocurrencies-bitcoin-dogecoin-and-xrp-are