Bitcoin fell below $100,000 amid a more extensive downturn in speculative investments, following the Federal Reserve’s announcement signaling a heightened caution regarding upcoming interest rate cuts.

The cryptocurrency declined by roughly 1% to $99,800 as of 10 a.m. Thursday in Singapore. This happened after a significant 5.1% drop on Wednesday, representing its steepest decrease since September. Other cryptocurrencies like Ether, XRP, and the popular Dogecoin also encountered challenges.

Fed officials have cut borrowing costs for the third consecutive time but have reduced the prospective number of cuts forecasted for 2025. Chair Jerome Powell emphasized that further advancements in inflation are necessary before any additional rate cuts can be contemplated.

The outcomes of the Fed meeting were not surprising for investors monitoring current trends in US inflation and economic activity, as noted by IG Australia Pty Market Analyst Tony Sycamore in a recent commentary. “However, it functioned as a catalyst to remove some of the speculative excesses that had flooded into risk assets like stocks and Bitcoin after the US election,” he remarked.

The Fed’s decision strengthened the dollar while negatively impacting global stocks and bonds. A dispute over a funding bill heightened anxiety, increasing the risk of a partial US government shutdown. US equity futures displayed mixed results on Thursday.

Despite recent volatility, Bitcoin has surged 50% since the November 5 election, achieving an all-time high of $108,316 earlier this week, fueled by President-elect Donald Trump’s intention to eliminate regulatory obstacles for crypto in the US. The Republican has also proposed the establishment of a national strategic reserve for the largest digital asset.

“All signs indicate a strong foundation and positive outlook for Bitcoin,” although some traders appeared disappointed by the Fed meeting and opted to take profits, remarked Paul Veradittakit, a managing partner at Pantera Capital.

Trump’s backing of cryptocurrency has overshadowed worries regarding stretched momentum and the lack of traditional valuation metrics. The previous administration of President Joe Biden had imposed regulations on the industry following a significant market downturn in 2022 that exposed risky practices and fraud.

© 2024 Bloomberg

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