The cryptocurrency market has taken a very deep dive lately. Most key assets such as Bitcoin, Ethereum, and XRP have recorded losses.
The cryptocurrency market has generally been in a bearish trend whereby the losses that Bitcoin, Ethereum, and XRP incurred grew to multiply. Most causes of this volatility were contributed to by the hawkish monetary policy of the Federal Reserve in the last couple of weeks where most of the sellers panicked and ended up going into liquidation amounting to over $800 million in a day. Since short periods of recovery, the experts are cautious concerning the prospects of the market.
Bitcoin, Ethereum, and XRP Prices Take a Hit
The crypto market saw intense turmoil in the last 24 hours. The world’s largest cryptocurrency, Bitcoin, lost 7.2% from a high of $106,500 to as low as $98,800. Ethereum was no different, losing 9% and reaching around $3,500.
The most battered top cryptocurrency among them is XRP; it was knocked down 19%, from a price tag of $2.6 to settle at $2.2. Other top currencies also received some percentage in their losses: Solana suffered by about 12%.
It has resulted in enormous liquidations, with more than $800 million in total liquidation over one singular day, according to CoinGlass. Mostly, sell-offs have been triggered by investors’ fear of selling and jitters that the market will experience further volatility.
Fed’s Hawkish Inflation Outlook Spooks Markets
The leading cause behind the crash of the crypto market was a recent policy turn taken by the Federal Reserve. Fed Chairman Jerome Powell announced a 25 basis point interest rate cut after the latest FOMC meeting, and rates have come down to 4.25%-4.5%. This was expected, but the comments made by Powell on an “elevated for longer” inflation path have scared off the markets.
The Fed increased its inflation outlook for 2025 to 2.5% from 2.1%. This means the future cuts in rates would be at a slower pace. The overall behavior of investors has thus changed, with most now being cautious, and even many are staying away from high-risk investments, among them cryptocurrencies.
Fed’s Hawkish Inflation Outlook Raises Market Concerns
The primary reason for this crypto market crash is the newest policy shift by the Federal Reserve. Fed Chairman Jerome Powell announced a 25 basis point interest rate cut, as rates now stand at 4.25%-4.5%, after a recent Federal Open Market Committee (FOMC) meeting. Though the reduction was widely expected, the statement of Powell on a “higher-for-longer” path of inflation spooked the market.
The Fed has also upgraded its inflation forecast for 2025 from 2.1% to 2.5%, which means its future cuts will be slowed down. This has made investors more cautious, while some have started to look away from high-risk ventures such as cryptocurrencies.
The Other Contributing Factors: Volatility and Panic Selling
Other factors contributing to the market going southward include other factors aside from the Fed’s policy. First of all, volatility has been the most significant factor, with the price actions of Bitcoin and other cryptocurrencies being mostly speculative. Short-term traders take advantage of the fluctuations while long-term investors are challenged by this ruthless market always.
Also, the panic selling brought about by FUD-induced fear, uncertainty, and doubt further pushed the price drops. The falling prices invited more investors into the selling frenzy and therefore further downward pressure on the prices.
Regulatory Uncertainty Fuels Investor Jitters
One major concern that is still affecting the cryptocurrency market is regulatory clarity. The lack of clarity regarding the regulation and definition of cryptocurrencies has continued to raise concerns. In some regions, regulations are quite tough or crypto is completely banned, thus making investors fear and pull out their funds.
More complexity in the cryptocurrency forecast is brought by the likes of Arthur Hayes, who has forecasted a market disaster due to potential political changes in 2025. The slower pace of policy adoption and the delay in broader acceptance through political hurdles, add another layer of uncertainty.
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Conclusion: The previous crypto market crash with drastic decreases in Bitcoin, XRP, and Ethereum prices indicates a hard time in the present regarding the economy due to alterations in economic conditions and recent policies. While some positive signals indicate a recovery state, the market is currently unstable and extreme caution will be required on the investor’s part.
The inflation forecast of the Federal Reserve and a little bit of speculation in the market and the uncertainty of regulations combined with the pre-existing anxieties of the inflation will define the course of markets going forward. As such, the fans and investors of cryptocurrencies should also pay close attention to these changes and modify their approach accordingly to this sort of turbulence.
For the holders of assets such as Bitcoin or XRP, it is crucial to observe market trends and be flexible in this recovery process of the market from this crash.
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