Fed Rate Cut Sparks Crypto Market Liquidation of Over $239 Million

The Federal Reserve reduced its key interest rate by 25 basis points on December 19, sparking a significant reaction in the crypto market. The rate cut led to a liquidation of over $239 million in just minutes, with major tokens such as Bitcoin, Ethereum, and XRP experiencing notable price drops.

Fed’s Cautious Approach to Future Rate Cuts

Fed Chair Jerome Powell stated that the agency can afford to “be more cautious as we consider further adjustments to our policy rate” due to the U.S. government’s less restrictive stance. Powell also mentioned that “we think the economy is in [a] really good place. We think policy is in a really good place.”

Crypto Market Liquidations Surge

According to data, the total long liquidation in the crypto market surged from $39.73 million to $239.2 million just 30 minutes after the news broke. In the past 24 hours, there have been a total of $853 million crypto asset liquidations, with Ethereum leading the charge at $134.9 million.

Bitcoin and Other Major Cryptocurrencies Dip

Bitcoin briefly dipped below the $100,000 threshold, dropping by 5% before recovering slightly. It is currently trading at $101,705, down 2.35% in the past 24 hours. Other major cryptocurrencies, including Ethereum, Solana, and XRP, followed Bitcoin’s descent.

Ethereum dipped by 0.68% after the Fed rate cut and has gone down by 4.5% in the past 24 hours, maintaining its price at $3,674. XRP saw its price dip by nearly 3% and has plummeted nearly 7% in the past 24 hours, sitting at $2.36.

Altcoins Market Suffers

The altcoins market suffered, with the total market cap of meme coins falling by nearly 8% to $105.2 billion. Dogecoin, the number one meme coin by market cap, fell by more than 7% shortly after the Fed cut and has not recovered since, trading at $0.36. PEPE dipped by nearly 4% shortly after the Fed cut and has gone down by more than 11% in the past 24 hours.

Implications for the Crypto Market

The Fed’s cautious approach toward future rate cuts suggests a continued focus on controlling inflation, which could lead to a strengthening of the dollar. This could indicate a potential decrease in the public’s investment in alternative assets like cryptocurrencies.

Investors should be aware of the potential implications of the Fed’s rate cuts on the crypto market and exercise caution when making investment decisions.

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