Bitcoin's Big Drop: What’s Causing the Slump?

Bitcoin took a dive below $92, 000 on Friday morning, rebounding slightly to $94, 104. 06. This drop follows the Federal Reserve’s signal that they’ll slow down interest rate cuts in 2025. Over the past day, Bitcoin has fallen by about 7. 7%, and since the start of the week, it’s down over 10% from highs of more than $106, 000. Other major cryptocurrencies like Ether, Solana, and Cardano also saw declines of over 10%. This isn’t typical, considering that lower interest rates usually boost markets, including cryptocurrencies. But Bitcoin is feeling the heat due to the Fed’s focus on inflation, which is still higher than they’d like.

The Fed thinks they might only need two interest rate cuts in 2025, half of what they previously thought. They’re being cautious because, as Fed Chair Jerome Powell said, “We have lowered our policy rate by a full percentage point from its peak. ” Inflation worries can make investors shy away from risky assets like Bitcoin and move towards safer options like Treasury notes. Even Powell shared doubts about creating a strategic Bitcoin reserve, saying, “We are not allowed to own Bitcoin. ” President-elect Donald Trump has been pushing for a national Bitcoin reserve and other crypto projects. He’s also tapped Paul Atkins, a crypto advocate, to replace the SEC Chair. But the Fed’s caution and the market’s reaction show that not everyone is on board with these ideas.

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