Fed's Hawkish Pause Triggers Late-Day Crypto Slump as Bitcoin Dips

The cryptocurrency market experienced a wave of volatility following the U.S. Federal Reserve's decision to maintain its benchmark interest rate at the 4.25%-4.50% range. While the move was widely anticipated, the central bank's accompanying economic projections painted a more hawkish picture than many traders had hoped for, leading to a late-day sell-off in digital assets. Initially, the market reaction was muted. Bitcoin (BTC) was little changed, trading around $104,200 in the minutes after the announcement, while traditional risk assets like the S&P 500 and Nasdaq posted gains. The Fed's press release noted that "economic activity has continued to expand at a solid pace," and that "labor market conditions remain solid," which seemed to underpin the initial stability. However, the devil was in the details of the updated forecasts, which soon soured market sentiment and reversed the early calm, particularly in the crypto sphere.

Dot Plot Details Dampen Rate Cut Hopes

The primary catalyst for the market's bearish turn was the Fed's revised quarterly economic projections, specifically the influential "dot plot." Policymakers signaled they now expect fewer rate cuts than they did in March. While they still foresee 50 basis points of cuts in 2025, bringing the year-end rate to 3.9%, the longer-term outlook became more constrained. Projections for 2026 and 2027 were revised higher to 3.6% and 3.4% respectively, indicating a slower path to monetary easing. Compounding this was an upward revision to inflation forecasts, with Personal Consumption Expenditures (PCE) now expected to hit 3.0% this year, up from 2.7%. Simultaneously, GDP growth projections for the year were trimmed from 1.7% to 1.4%. This combination of sticky inflation, weaker growth, and a more hesitant Fed created a challenging environment for risk assets like cryptocurrencies, which thrive on liquidity and dovish monetary policy.

Bitcoin and Altcoins Succumb to Broader Market Fears

As the implications of the Fed's hawkish stance sank in, the crypto market began to crack. The sell-off intensified into the U.S. evening hours, exacerbated by rising geopolitical tensions. Bitcoin (BTC) fell more than 2.5% over a 24-hour period to trade around $105,900. Current data shows the BTC/USDT pair trading at $107,319, having experienced a volatile session with a 24-hour high of $108,746 and a low of $106,766. The pain was more acute in the altcoin market, where major tokens like Ether (ETH), Solana (SOL), and XRP saw drops ranging from 5% to 7% during the sell-off. While 24-hour data for some pairs like SOL/USDT shows a gain of 3.9% to $156.99, this reflects a sharp intraday reversal and highlights the intense selling pressure that emerged late in the day. The ETH/BTC pair, trading at 0.02312, showed a 2.25% gain, suggesting some capital may have rotated from altcoins into Bitcoin as an initial defensive move before the broader market downturn took hold.

The bearish sentiment was not isolated to crypto. According to reports, renewed threats of trade tariffs and escalating tensions with Iran contributed to a risk-off mood. While U.S. stocks managed to recover and close with modest gains, the more speculative crypto market was unable to shake off the combination of macroeconomic and geopolitical headwinds. However, some economic data provided a glimmer of hope for crypto bulls. The Producer Price Index (PPI) for May came in softer than expected, and initial jobless claims matched a multi-month high of 248,000, with continuing claims reaching their highest level since November 2021. These data points suggest underlying economic weakness that could eventually force the Fed to adopt a more dovish stance, regardless of its current projections. For traders, this creates a complex dynamic, with the immediate trend pointing downwards while long-term catalysts for a crypto rally continue to build in the background. Key support for BTC now lies near the recent low of $106,500, while resistance is found at the $108,500-$108,800 zone.