Replays · FOMC · 18 Dec 2024, 19:00 UK

A cut, with fewer to come

Bitcoin had passed $100,000 for the first time earlier in December 2024, and markets expected one more Fed rate cut before the year ended. They got it. But the Fed's projections showed only two cuts in 2025, half as many as in September. Bitcoin fell for almost two hours, and smaller coins fell much harder.

Upper bound of the Fed funds range after each decision from July to December 2024. Source: Federal Reserve, FRED DFEDTARU.

The decision

At 19:00 UK the Fed cut its target range by a quarter point to 4.25% to 4.50%, the third cut since September. The median projection pointed to only two quarter-point cuts in 2025, down from four in the September projections. In the press conference, Jerome Powell said the Fed could be more cautious about further cuts. Asked about a possible US government Bitcoin reserve, he said the Fed is not allowed to own Bitcoin and is not looking for a law change to allow it.

A slow slide, not a crash

1 19:00 UK: decision and projections
2 19:30 UK: press conference begins
3 20:45 UK: about 4.3% down, near $100,220

Bitcoin, five-minute candles from 30 minutes before to four hours after. % from the 19:00 UK price of $104,736. Source: Bitstamp.

The first half hour was fairly calm, with Bitcoin about 1% lower. The selling grew during the press conference. Bitcoin ended the first hour -1.9% and reached its low, near $100,220, at 20:45 UK. That is a modest first hour for Bitcoin by FOMC standards, #11 of 80 in our data, but it kept falling after the hour was over.

US stocks fell at a similar pace. Both the S&P 500 ETF and the Nasdaq 100 ETF were down about 1.5% after an hour and more than 3% at the 21:00 UK close.

Who fell furthest

Change over the 24 hours after the decision.

After 24 hours, Bitcoin was 5.6% below the release price. The smaller coins, many of which had rallied strongly after the US election, fell two to three times as far. Dogecoin lost 18% and Chainlink 18%.

The pound weakened too, finishing -1.3% against the dollar at the next fix. A week later Bitcoin was still 5.8% lower, which makes this one of the clearer cases in our data of a Fed meeting changing the direction of the crypto market for more than an evening.

Sources: release time and figures from the Federal Reserve's statement and target range (FRED DFEDTARU). Crypto: Bitstamp 5-minute candles; SPY/QQQ: IEX. No consensus forecasts are shown because they are proprietary; comparisons are with the previous release. “× normal hour” compares the first-hour move with the median move in matched quiet hours. How we measure it.