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The Federal Reserve is scheduled to announce its interest rate decision during its meeting on Wednesday. Economists widely predict that the Fed will cut rates for the third time in a row, bringing the federal funds rate down to a target range of 4.25% to 4.5%.

Another 25-basis-point rate cut would result in a total reduction of one full percentage point since September. The federal bank first reduced interest rates by 0.5 percentage points in September and then made another cut of 0.25 percentage points in November.

According to the CME FedWatch Tool, there is now a 95.4% chance of a 25-basis-point rate cut, while the probability of maintaining current rates stands at 4.6%. This reflects a slight adjustment from yesterday, when the likelihood of a rate cut was around 98%.

Nevertheless, compared to last week, expectations for a rate reduction have strengthened, particularly after November’s inflation data met expectations and job figures showed strength.

According to the Bureau of Labor Statistics (BLS), the US economy added 227,000 jobs in November, exceeding expectations and showing a rebound from months disrupted by hurricanes and strikes.

Job growth has been robust, particularly in sectors such as health care and tourism. Solid job gains contribute to a positive economic outlook, which can influence the Fed’s decision-making regarding interest rates.

Last week, the BLS reported that November’s CPI increased by 2.7% year-over-year, in line with expectations. Immediately after the report, the odds of a rate cut in December rose to approximately 96%.

Future rate cuts are less likely

Inflationary pressures have stabilized, but have yet to return to desired levels. The Fed has been working to bring down inflation from a peak of 9.1% in June 2022, and while there has been progress, the current rate is still above their target of 2%.

Jacob Channel, senior economist at LendingTree, said in a statement to CBS News that the Fed will likely proceed with a 25-basis-point cut at its upcoming meeting, but there may not be further cuts in the immediate future.

The economist also noted potential changes in economic policies under President-elect Donald Trump, which “might cause a resurgence in inflation or otherwise throw the economy off balance.” In this scenario, the Fed may choose to hold off on further rate cuts to assess their effects on the economy.

Crypto markets brace for volatility ahead of Fed rate decision

The crypto markets are bracing for increased volatility as the Federal Reserve’s interest rate decision draws near. Bitcoin (BTC) has fallen by 2% in the last 24 hours, while Ethereum (ETH) has dropped by 4%, according to CoinGecko data.

The overall crypto market capitalization currently stands at $3.8 trillion, reflecting a 4% decline over the past day.

Bitcoin dipped to $104,000 after peaking at $107,000 on Tuesday. The pullback triggered a broader decline in altcoins, with Ripple (XRP), Solana (SOL), Doge (DOGE), and Binance Coin (BNB) also experiencing slight losses.

The markets may become more turbulent as the key event looms.

Among the top 100 crypto assets, Pudgy Penguins’ PENGU token posted the biggest losses at 55%, likely due to heavy selling pressure following its airdrop to NFT holders, which triggered a steep decline in both the token’s value and the floor price of Pudgy Penguins NFTs.

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The Bank of Japan (BOJ) kept interest rates unchanged at 0.25% during its Thursday meeting (local time), marking the third consecutive hold following similar decisions in September and October.

The choice to maintain interest rates at their current levels was somewhat foreseen. A recent report from CNBC showed a narrow majority of economists predicted the BoJ would keep its rates unchanged at the conclusion of its December 19 meeting, although many foresee a possible rate increase in January based on economic indicators.

The BOJ’s decision comes as the US Fed reduced its benchmark interest rates by 25 basis points on Wednesday, marking its third rate cut since the onset of the COVID-19 pandemic over four years ago. Despite cutting rates, the Fed struck a more hawkish tone than anticipated. Fed Chair Jerome Powell stressed that future rate cuts would be more deliberate in light of persistent inflation and economic uncertainties.

The BOJ’s stance reflects its careful approach as it monitors domestic wage growth, spending patterns, and potential policy shifts under the incoming Trump administration.

Regular wages in Japan have been increasing at an annual rate of 2.5% to 3%, driving inflation above the BoJ’s 2% target for more than two years. However, recent declines in household spending have contributed to the bank’s cautious approach to rate hikes.

The BoJ last raised rates in July and has indicated willingness to tighten further if wage growth meets expectations. The central bank is also weighing external factors, particularly the impact of US economic policies under Trump, which could affect Japan’s economic outlook.

Market expectations for a December rate hike have diminished following recent media reports. Analysts indicate the BoJ may wait for results from upcoming wage negotiations in early 2025 before adjusting monetary policy.

This is a developing story.

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Bitcoin fell close to 6%, trading under $100,000 amid a market-wide sell-off after the Fed adopted a hawkish tone at Wednesday’s FOMC meeting, according to data from CoinGecko.

The Fed cut its benchmark interest rate by 25 basis points as expected but projected only two rate cuts in 2025, down from its previous forecast of four cuts. Fed Chair Jerome Powell indicated that the central bank would be more cautious when considering further adjustments to its policy rate.

The Fed’s surprisingly hawkish stance has prompted analysts to adjust their rate cut forecasts. Analysts at Morgan Stanley noted that they no longer expect a rate reduction in January 2025.

Likewise, market expectations for a rate cut at the Fed’s January meeting have diminished. The probability of a rate cut at the Fed’s January meeting fell to 8.6%, based on CME FedWatch Tool data, while the likelihood of maintaining current rates rose to 91% from about 81% a day earlier.

Stock and crypto markets reacted strongly to Powell’s hawkish signals. The Nasdaq dropped more than 3%, and the Dow recorded its longest losing streak in 50 years. The dollar reached a two-year high as bond yields increased across the curve.

Bitcoin briefly lost $5,000 during Powell’s speech and fell to $98,900 on Wednesday evening before recovering above $100,000. Other crypto assets also declined, with Ethereum falling over 5% to $3,600, Ripple dropping nearly 9%, and Dogecoin declining 8%, per CoinGecko data.

Meme tokens experienced the steepest declines over 24 hours, with Popcat (POPCAT) falling 20% and Peanut the Squirrel (PNUT) dropping 19%. Other meme coins including Pepe (PEPE), dogwifhat (WIF), Bonk (BONK), and Floki (FLOKI) all recorded double-digit losses.

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The Bank of England (BoE) has decided to maintain interest rates at 4.75% amid reaccelerating inflation in the UK, according to the minutes of the Monetary Policy Committee’s meeting released on Thursday. The decision to keep rates unchanged was made by a 6-3 vote, with three members advocating a 25-basis-point reduction.

UK inflation edged higher in November 2024, according to data released today by the Office for National Statistics. The Consumer Price Index (CPI) rose to 2.6% in November, up from 2.3% in October, marking the second consecutive monthly increase above the central bank’s 2% target.

The Consumer Price Index including owner occupiers’ housing costs (CPIH), the UK’s preferred measure of inflation, climbed to 3.5% in November from 3.2% in October.

Prices for goods and services in the UK are rising faster than they were in October. This increase is driven by factors like higher transportation costs and rising housing costs. While the overall inflation rate is increasing, the rate of increase has slowed down compared to previous months.

Even though recent inflation figures are not beyond market expectations, and some inflationary pressures may indeed be easing, persistent inflation in the service sector remains a key concern for the central bank.

The services sector, which accounts for around 80% of the UK economy, has shown stubbornly high inflation rates, prompting the central bank to maintain a cautious approach.

Economists had already ruled out any possibility of a rate cut from the current 4.75% as soon as UK inflation data was out, as the BoE aims to maintain its target inflation rate of 2%, Morningstar reported.

The BoE’s decision comes after the US Fed lowered interest rates by 25 basis points, matching market expectations. The Bank of Japan on Thursday also maintained its current interest rate.

While the US central bank’s decision was consistent with forecasts, the Fed’s message came surprisingly more hawkish.

Fed Chair Jerome Powell signaled a slower pace of future cuts, given that inflation remains above its 2% target. The number of interest rate cuts in 2025 may be limited to two, instead of four, with a close eye on economic conditions.

Global markets took a hit following the Fed’s hawkish signals.

US stocks experienced their largest daily decline in months, with major indexes posting substantial losses. European stocks also tumbled, reflecting a broader sell-off in response to the Fed’s stance.

Risk-sensitive assets, including crypto assets like Bitcoin, faced downward pressure as market sentiment shifted towards caution. Bitcoin’s price declined approximately 6%, trading below the $100,000 mark on Wednesday evening before recovering above $102,000 at press time, per TradingView.

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Leveraged liquidations across crypto assets surged to $1 billion following a brutal sell-off that sent Bitcoin tumbling below $96,000 on Thursday, according to Coinglass data.

Long positions accounted for the vast majority of losses at approximately $878 million, compared to $160 million for short positions.

Bitcoin rebounded above $97,000 at press time but remains below its daily peak of $102,000, CoinGecko data shows.

It was not just Bitcoin; most crypto assets also declined in value. The total crypto market cap dipped 9.5% to $3.4 trillion at the time of reporting.

Ether lost 8%, Ripple shed 5%, and Solana and Dogecoin experienced even sharper double-digit losses over the past 24 hours. Smaller-cap assets were particularly hit hard, with only Movement (MOVE) paring its losses.

Fed’s hawkish stance

Markets likely reacted in turmoil to the Fed’s unexpectedly hawkish messages following the rate cut decision. The Fed on Wednesday delivered a 25-basis-point rate reduction, but signaled fewer cuts in 2025.

Uncertainties in the economy, particularly with the incoming administration, prompted the central bank to adopt a more cautious stance. Fed Chair Jerome Powell stated that it’s prudent to “slow down” when the economic outlook is unclear.

Inflation has cooled from its peak of around 9% in June 2022, but it’s still stubbornly above the Fed’s target. Lowering interest rates can stimulate economic growth by making borrowing cheaper, but it can also contribute to higher inflation.

There are worries on Wall Street that Trump’s proposed economic policies, including tariffs, could exacerbate inflation, though they may boost economic growth in the short term.

Bitcoin ETF performance

Elsewhere in the Bitcoin ETF market, emerging indicators suggest a potential shift in sentiment.

Although US spot Bitcoin ETFs have maintained a 14-day positive inflow streak, recent net inflows have been disproportionately concentrated within BlackRock’s IBIT. Other ETFs have reported either zero net flows or net outflows.

Data shows that Grayscale’s low-cost Bitcoin ETF shed around $188 million on Thursday, its record low since launch, while Grayscale’s Bitcoin Trust saw approximately $88 million in net outflows.

Further data released later today will provide a more comprehensive assessment of ETF performance.

Healthy correction?

Despite the sell-off, Bitcoin has gained approximately 130% this year. MicroStrategy, which owns nearly 2% of Bitcoin’s supply, continues its acquisition strategy. The firm has purchased $3 billion worth of Bitcoin so far this month.

Many crypto traders see the recent pullback as a healthy correction.

“It’s the same story every time, and it never changes. Markets aren’t designed for the majority to win. Corrections are a natural part of bull markets,” popular analyst ‘Titan of Crypto’ stated.

The Crypto Fear and Greed Index, which measures the emotional state of the crypto market, currently sits at 75, indicating a sentiment of greed among crypto investors despite recent market volatility and price corrections.

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US spot Bitcoin ETFs suffered their largest-ever single-day outflow amid a sharp crypto market sell-off following the FOMC meeting. According to Farside Investors data, approximately $672 million exited these funds on Thursday, ending a period of net inflows that began in late November.

The massive withdrawal eclipsed the previous record of nearly $564 million set on May 1, when the group of spot Bitcoin ETFs saw nearly $564 million in withdrawals after Bitcoin dropped 10% to $60,000 over a week.

Fidelity’s Bitcoin Fund (FBTC) led the exodus with $208.5 million in outflows, while Grayscale’s Bitcoin Mini Trust (BTC) recorded its lowest point since launch with over $188 million in net outflows.

ARK Invest’s Bitcoin ETF (ARKB) and Grayscale’s Bitcoin Trust (GBTC) also saw huge withdrawals, with ARKB losing $108 million and GBTC shedding nearly $88 million. Meanwhile, three competing ETFs managed by Bitwise, Invesco, and Valkyrie collectively lost $80 million.

BlackRock’s iShares Bitcoin Trust (IBIT), which logged $1.9 billion in net inflows this week and was a major contributor to the group’s recent strong performance, recorded zero flows for the day.

WisdomTree’s Bitcoin Fund (BTCW) was the sole gainer, attracting $2 million in new investments.

Bitcoin’s price fell below $96,000 during the market downturn and currently trades at around $97,000, down 4% over 24 hours, according to CoinGecko data. The steep decline across all assets triggered $1 billion in leveraged liquidations on Thursday, Crypto Briefing reported.

The market turbulence followed the Fed’s hawkish messaging after its rate cut decision. The Fed implemented a 25-basis-point rate reduction on Wednesday but indicated fewer cuts in 2025.

Although price volatility persists, the Crypto Fear and Greed Index still indicates greed sentiment at 74, down only one point from yesterday.

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Hyperliquid’s native token HYPE surpassed a $10 billion market capitalization, with its price exceeding $30 per token.

This milestone comes amid broader market volatility following Fed Chair Jerome Powell’s hawkish speech on Wednesday.

While Bitcoin fell from its all-time high of $108,000 to $92,000 yesterday—a nearly 15% decline—and many altcoins experienced drops exceeding 25%, the market has since shown some recovery, with Bitcoin trading around $97,000.

In the same period, HYPE token also saw some losses but has now surged over 20% in the past 24 hours, entering the top 25 coins by market cap.

Hyperliquid is on the verge of entering the top 20 coins by market cap, currently just below Polkadot, which has a market cap of $10.5 billion.

At press time, Hyperliquid stands at $10.2 billion and could potentially flip Polkadot in the coming days.

The token’s rise follows one of the most anticipated token airdrops of the year, with the platform distributing 310 million tokens to Hyperliquid users, making it the largest airdrop in crypto history.

This distribution surpassed Uniswap’s UNI airdrop from September 2020, which had previously held the title as the biggest airdrop, peaking at $6.4 billion in value in May 2021.

Hyperliquid has recorded $13.7 billion in 24-hour trading volume and $561 billion in total volume, according to DefiLlama data.

One of the reasons for Hyperliquid’s success is its elimination of gas fees for transactions.

Additionally, the platform maintains low fees on perpetual contracts and opening trades, which are reinvested into the ecosystem through token buybacks or by supporting ecosystem vaults.

This model, combined with its ease of use and rapid interface, has earned Hyperliquid the nickname “decentralized Binance.”

Building on this success, with its token now valued at $30, Hyperliquid has demonstrated its potential as a leader in the DeFi space.

Looking ahead, Hyperliquid is preparing to enhance its ecosystem further with the launch of its Ethereum Virtual Machine (EVM) integration, HyperEVM, currently in its testnet phase.

This update will introduce Ethereum-compatible smart contracts, boosting cross-chain capabilities and expanding DeFi applications within the platform.

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