Cryptocurrency investors It has been experiencing negative days for a while after new successive BTC records. The interest rate decision announced last week undermined the risk appetite in cryptocurrencies. On the other hand, although BTC attempted a new attempt to reach six-digit levels in the last 24 hours, it was unsuccessful. So what are the Fed expectations for next year?
Fed and 2025
This year, Fed members made major revisions when making their 3-year interest rate forecasts. However, at the end of the day, we saw that the 100bp discount, the best 2024 projection of the year, was implemented. Moreover, the fact that interest rate cuts started with a big step with a 50bp discount created a feeling that the support of the macroeconomy would be strong in cryptocurrencies.
Then October inflation The numbers came and months later we saw the start of the rise. November inflation data was not that good either. Inflation, which dropped to 2.4%, rose again to 2.7%, and it was not easy to fall below 3%.
The problem here is that inflation has stopped falling and moved in the opposite direction. Defining the 2% target as a point that can be reached within 2 years, Powell declared the obvious at this stage.
We have already mentioned that we may see the rate of interest rate cuts weaken significantly in 2025. The dot chart containing the predictions of Fed members also says that there may be only 2 interest rate cuts during 2025.
In the days when interest rate cuts started, the thing we talked about most was the rate of interest rate cuts. Monetary relaxation, which started with a 50bp discount, led to the expectation that there would be much more discounts for 2025. Of course, this expectation also had its equivalent in cryptocurrencies and supported the rise. At this point today, we see that BTC has fallen sharply from 108 thousand dollars and is having difficulty recovering, as expectations have significantly diminished from optimism.
On the other hand, even before Trump took office Chinese He signaled that trade wars would start again. This move by Trump, who will try to restrict products coming from China with additional customs duties, is expected to make the decline in inflation even more difficult. Moreover, these customs duties may not be limited only to China.
Powell has refrained from commenting in his last few statements, and especially in his speech last week, as the scope of the “additional tariffs” has not yet been clarified. However, we know that Fed members are working on projections to see the risks that different possibilities will pose.
A Nice Surprise in 2025
And let’s talk about the good stuff. The macroeconomic foam on the cryptocurrency charts has been cleared. Markets are adopting a more realistic view of the Fed’s interest rate policy. Despite all this BTC price It can hold around $95,000 and we have not seen a sharp drop below $90,000.
All this means that there may be a significant increase in prices due to developments that will cause interest rate cut forecasts to be revised in favor of the bulls next year. Every employment data, every CPI, PCE, PPI data will occupy our agenda with the potential to be an upward trigger for the price.
Data reflecting the increase in unemployment and signals of a decrease in inflation will support the rise. If we encounter the good while the markets have priced in the bad, this can make the coming year much more enjoyable.
What if the increase in inflation reaches 4% with Trump’s moves? In this case, the Fed will not immediately increase interest rates, but there may be sharp declines in risk markets with the concern that the reductions will turn from a pause to a halt.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that crypto currencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
