The cryptocurrency market has experienced a notable downturn over the past week,

The cryptocurrency market has experienced a notable downturn over the past week, influenced by several key factors:

Federal Reserve's Monetary Policy

On December 18, 2024, the Federal Reserve reduced the federal funds rate by 0.25 percentage points, bringing it to 4.25%-4.5%. Despite this cut, the Fed signaled a cautious approach toward future rate reductions, indicating that only two additional cuts are anticipated in 2025, fewer than previously expected. This stance suggests a prolonged period of tighter liquidity, which has historically posed challenges for risk assets, including cryptocurrencies.

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Market Reaction and Liquidity Concerns

The Fed's cautious outlook has led to a contraction in global liquidity, adversely affecting the crypto market. Analysts note that shrinking central bank balance sheets and increased bond market volatility contribute to an environment unfavorable for speculative assets like Bitcoin and Ethereum. This tightening liquidity has resulted in significant price declines across major cryptocurrencies.

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Recent Price Movements

As of December 26, 2024, Bitcoin's price is approximately $95,666, reflecting a decrease of about 3.5% from the previous close. Ethereum is trading around $3,325, down approximately 4.7%. Other cryptocurrencies, such as BNB, XRP, and Cardano, have also experienced declines in the range of 2% to 6%.

Broader Economic Indicators

The upcoming release of the personal-consumption expenditures (PCE) index for November is adding to market uncertainty. As a key inflation measure, the PCE index will influence the Federal Reserve's future policy decisions. If the data indicates persistent inflation, it could reinforce the Fed's cautious stance, potentially exerting further pressure on the crypto market.

The Africa Logistics

In summary, the recent decline in cryptocurrency prices can be attributed to the Federal Reserve's cautious monetary policy outlook, resulting in tighter liquidity conditions that are less conducive to the growth of speculative assets like cryptocurrencies.