The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Bitcoin has seen a sharp decline, falling 7.3% in 24 hours to $94,976, according to CoinDesk data, after briefly hitting record highs earlier this week. The drop comes as the Federal Reserve’s hawkish tone on future rate cuts spooked markets.
Key Drivers Behind Bitcoin's Slide
- Fed’s Rate Signals: The Federal Reserve announced fewer anticipated interest rate cuts for 2025, dampening market sentiment across equities and cryptocurrencies.
- Broader Market Pullback: Bitcoin's decline follows the S&P 500's 2.95% drop on Wednesday, its worst Fed decision-day performance in nearly 15 years.
- Upcoming PCE Inflation Data: The Personal Consumption Expenditures (PCE) report, a key inflation measure, is expected to further shape expectations for rate cuts and could impact crypto prices.
Market Sentiment
- Cyclical Nature: Analysts view Bitcoin's pullback near the $100K psychological level as part of its natural cycles, where indecision and hype around milestones often lead to short-term corrections.
- Sector-Wide Pressure: The broader crypto sector has been affected, with strategist Louis Navellier citing the equity market’s pullback as a contributing factor.
Analyst Insights
- Resilience Amid Declines: FxPro analyst Alex Kuptsikevich noted that Bitcoin's drop mirrors stock market declines but demonstrates relative strength compared to its historically larger losses during pullbacks.
- Outlook for 2025: Kuptsikevich highlighted that Bitcoin’s cyclical trends could set the stage for further price growth next year, particularly as regulatory clarity under the incoming Trump administration boosts investor confidence.
Big Picture
Despite this week’s turbulence, Bitcoin remains up 130% year-to-date, fueled by optimism surrounding a pro-crypto regulatory environment under Donald Trump’s administration. However, its cyclical nature and sensitivity to macroeconomic shifts underscore the importance of cautious optimism as it continues to test the $100K level.
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