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“We will go slowly with cuts,” Fed says of interest rates.
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Bitcoin still looks bullish for 2025, but “the range of possibilities widens.”
The price of bitcoin (BTC) fell this Friday for the third consecutive day, breaking the upward trend it was experiencing towards new all-time highs. With such a panorama, correlated with the stock markets in the United States, uncertainty grows about its continuity until 2025.
The press conference of the Federal Reserve (Fed), the Central Bank of the United States, on Wednesday triggered the collapse of risk markets. His key message was “we are taking it slower,” predicting between 1 and 2 cuts in interest rates by 2025, depending on economic data.
“This new stance is driven by the stickiness of inflation and the relative strength of employment (despite signs that it is weakening),” says Charles Edwards, founder of Capriole Investments. In a report In this regard, he maintains that this announcement was inevitable and It’s good that it happened now instead of too late.
For the specialist company, it makes no sense to continue aggressively cutting interest rates in the future, when annual inflation in the country has been stagnant since last year at around 3% and, after a drop, has risen again.
Below, you can see the consumer price index (CPI) in the economic power at an annual level per month.
Annual US CPI recorded in recent months. Fountain: Investing.
“This announcement is by no means a turnaround, and there really wasn’t any major change in the Fed’s approach, but it does tell us that we need to be more open-minded to a number of possibilities,” Edwards says. In other words, he specifies that it means more uncertainty in the future orientation of the organization.
Distinguish that Prices had discounted a lax Fed for 2025, but “now that image is much more opaque”. Markets hate uncertainty, which explains the rise in 10-year Treasury bonds and the fall in risk assets, he says.
This scenario is, for Edwards, “a new reminder that sometimes no matter how good your set of metrics or strategies are, often singular, meaningful and independent data points can change markets.”
Anyway, according to your vision, there is a possibility of a rebound in risk markets at some point in the coming days due to this initial overreaction. “It is possible that the dream of the Santa Claus rally is not dead yet,” comments the specialist.
Argentina is an example of how the markets will fare, according to Capriole
The billions of dollars that came into bitcoin in the last few weeks before the recent drop, mostly maintaining its price above USD 100,000, supports the bullish conviction of Capriole Investments.
“We are very optimistic about an incredibly strong 2025 for risk assets, both for bitcoin and equities,” Edwards clarifies. He supports his forecast in the Argentine stock market, which has had an incredible performancein the face of the positive and drastic economic deregulation implemented by the government of Javier Milei.
The Department of Government Efficiency’s (DOGE) plan to cut government bureaucracy in the United States, following in Milei’s footsteps, “will be a huge mountain to climb,” says the founder of Capriole Investments.
He also highlights that this body will be led by billionaire businessman Elon Musk, which he considers correct. “He has a track record of always achieving the impossible, so I’m sure we have some exciting and positive surprises in store for us in 2025,” Edwards concludes.
Tuning in, Jamie Cox, Managing Partner at Harris Financial Group, said on the recent broad-based decline: “Markets have a very bad habit of overreacting to the Fed’s policy moves.”
“The Fed didn’t do or say anything that deviated from what the market expected, this seems more like ‘I’m leaving for Christmas break so I’ll sell and start next year,'” Cox added.
It should also be noted that the uncertainty about the Fed’s future policy was added to the fact that Jerome Powell, president of the organization, declared that they are not authorized to “store” bitcoin. This added doubt about whether President-elect Donald Trump will be able to create his promised national strategic reserve in this asset.
Furthermore, as CriptoNoticias reported, on Thursday the US Congress rejected a financing plan promoted by Trump and his advisor, Elon Musk. This is something that seems to have increased reluctance in the markets, with unprecedented outflows being recorded in exchange-traded funds (ETFs) of bitcoin yesterday.
Although, the markets stopped the fall today due to the publication of the personal consumption expenditure (PCE) price index in the United States. This report showed a smaller rise than expectedwhich was received with positivism in principle, as seen below.
BTC-USD price so far in December. Fountain: TradingView.
Warning signs to take into account for the bitcoin market
According to Capriole Investments, there are some medium-term trend warning signs that traders should watch closely. One is that, If 10-year Treasuries continue to rise through the end of the year, risk assets will come under significant pressure.
Another is that US liquidity is on a downward trend this year, as the following graph shows. A reversal of this trend, driven by interest rate cuts, would contribute to more capital entering the markets.
Liquidity in the United States, greater economic power. Source: Capriole Investments.
Added to this is the risk of a tightening by the Fed that could create substantial headwinds if jobs or the economy slow. “So far, this hasn’t mattered in light of the rise of the ‘Trump bomb’ across the market, but it is one of our biggest concerns going forward,” he notes.
In this sense, It is crucial to closely monitor macroeconomic data to identify the possible future of the markets in general and bitcoin.
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