Bitcoin Plunges 5 Percent on Long-Term Inflation Fears. What Happened to the Cryptocurrency Market Today?
In mid-September, the US Federal Reserve cut its benchmark interest rate by 50 basis points. The cut was the first in four years, and bankers decided to use a step other than the minimum of 0.25 percent. Given this, crypto traders and other market participants began to count on a gradual economic recovery and increased investor activity. However, data now suggests that the negative situation may drag on — and coins have already responded to this.
Why Bitcoin Fell Today
Over the past 24 hours, BTC has fallen by 5 percent, Ethereum and Solana have fallen by 7 percent, and DOGE and ADA have fallen by 10 and 14 percent, respectively.
As a result, the total market capitalization of the industry fell by 7.6 percent in a day to $3.48 trillion.
Current cryptocurrency rates today
And while most of the biggest coins are still posting modest gains on a weekly basis, today’s market crash was truly painful – especially for meme token holders.
The largest meme tokens have lost at least 10 percent of their price in a day
At the beginning of the week, traders were actively betting on Bitcoin growth to the level of 110-120 thousand against the backdrop of Donald Trump’s inauguration approaching on January 20. However, now the attitude towards the immediate prospects of the market has become the opposite.
A similar situation is observed in other areas. A quote on this subject was shared by Presto Research analyst Min Jung in a conversation with The Block journalists. Here is his quote.
Cryptocurrencies weren’t the only ones to fall yesterday — the NASDAQ and S&P 500 also fell more than 1 percent amid inflation concerns. Fresh ISM data showed the U.S. economy growing faster than expected, fueling fears of persistent inflation. That sent bond yields soaring, with the 10-year Treasury yield hitting its highest since April.
That is, market participants are beginning to think that the current problems in the global economy may prove to be sustainable. And this is a cause for concern, because the US Federal Reserve has been trying to fight inflation over the past few years, which culminated in a major rate cut in September 2024.
According to BTC Markets crypto analyst Rachel Lucas, recent data on the US economy has clearly hinted that the Federal Reserve may be forced to keep interest rates high for a longer period. And they traditionally lead to a decrease in economic activity, so this prospect is perceived negatively by the markets.
Lucas commented on what was happening as follows.
The market was already under pressure after Fed Chairman Jerome Powell’s December statements indicated a tight monetary policy stance and dampened hopes for additional rate cuts while increasing volatility.
US Federal Reserve Chairman Jerome Powell
In December, Jerome Powell signaled that the fight against inflation was still ongoing, and bankers might pause in cutting interest rates.
As of today, traders believe that the Fed will leave its benchmark interest rate unchanged at the next FOMC meeting on January 29, 2025. The probability of this is estimated at 95 percent.
Prospects for a change in the US base interest rate at the next FOMC meeting
In such circumstances, Trump’s upcoming inauguration on January 20 will only add uncertainty to the market and lead to additional volatility in rates, Lucas believes. She continues.
Most members of Congress support the cryptocurrency industry, and key appointments like Scott Bessent as Treasury Secretary and Elon Musk as an adviser clearly indicate a sharp turn by the new presidential administration toward the crypto industry.
Which countries are buying cryptocurrencies?
While the market is falling, the authorities of some countries and regions are choosing cryptocurrency for their own reserves. Today, the government of the Special Administrative Region of Bhutan called Gelephu announced the creation of a cryptocurrency reserve.
It is worth noting that not only bitcoins will be used for accumulation, but also ETH together with BNB.
Buying Cryptocurrency by Investors
The addition of cryptocurrency assets to the reserve should increase the economic resilience of the area, as well as create new opportunities for Bitcoin mining, which Bhutan officially engages in.
Here’s a quote from today’s announcement, as reported by Cointelegraph .
Gelephu intends to recognize digital assets with large market capitalization and deep liquidity. This will ensure that they can be easily bought and sold with minimal impact on the asset’s price.
The new plan calls for the city administration to discuss a related cryptocurrency savings initiative with senior Bhutanese government officials and global industry leaders in March 2025.
The news was commented on by the former head of the Binance crypto exchange, Changpeng Zhao, on Twitter .
Some notes on the creation of a cryptocurrency Strategic Reserve for Gelephu in Bhutan:
1. This is not just a Bitcoin reserve, but a cryptocurrency reserve that also includes ETH and BNB. This may be the first such case, but it certainly won’t be the last. The situation shows that Bhutan is open not only to BTC but also to other digital assets. Overall, this is a smart move by the country to attract crypto companies, investment, and innovation.
By the way, the Kingdom of Bhutan has been known for years for mining Bitcoin using excess hydropower. In fact, they already have a BTC reserve.
2. For BNB, this is recognition. This move also opens the door for BNB and other cryptocurrencies to be included in other countries’ National Strategic Reserves.
According to the Arkham platform , the Bhutanese government currently holds the equivalent of $1.1 billion in crypto, most of which is in Bitcoin.
Current Cryptocurrency Holdings in Bhutan
The collapse of Bitcoin and the cryptocurrency market fits in nicely with the news of a city-wide coin reserve. All of this suggests that digital assets are indeed gaining acceptance as a store of value. And so far, this trend is just picking up steam.
