- The valuation of the cryptocurrency sector fell below the $3.5 trillion mark on Thursday, with a 10.7% decline reflecting $390 billion worth of outflows.
- The fall in crypto markets is linked to the US central bank hinting at a dovish stance for 2025.
- Etherum and Solana suffered double-digit losses as nervous investor reaction triggered a market-wide selloff of meme coins.
Altcoin Market Updates: Ethereum, Solana Among Biggest Losers After Fed Launches Meme Coin Salem-off
The Federal Reserve’s (Fed) interest rate cut of 25 basis points on Wednesday was in line with market expectations.
However, it was overshadowed by harsh comments from Chairman Jerome Powell who signaled fewer rate cuts in 2025. This immediately sparked a negative response from crypto traders.
Crypto Market Performance | December 18, 2024 | Source: Coingecko
Within 24 hours of the FOMC meeting, the global crypto market lost 10.7%, wiping out more than $390 billion in market value, according to data from Coingeck.
Risk sentiment worsened further, with meme coins — known for their high volatility and low liquidity — experiencing the sharpest declines.
Major meme coins such as DOGE, SHIB, and WIF saw heavy losses, while Ethereum and Solana, the two leading blockchains for hosting meme coins, also suffered significant price drops. This highlights how the Fed’s dovish stance has dampened risk appetite in the crypto market.
Chart of the Day: Crypto AI Sector Market Cap Falls Below $35B Amid Google, US Fed Bearish Headwinds
The Crypto AI sector has posted volatile results so far in December 2024, amid major changes in the global technological and macroeconomic landscapes. According to data from Coingeck, the dovish stance of the US Fed caused the value of the crypto AI sector to fall below the $35 billion mark on Thursday, reflecting losses of 16.5% and outperforming the market average.
Google announced the Willow quantum computing chip on December 10, sparking concerns that it could affect the cryptographic encryption that underpins the cryptocurrency sector. Experts predict that quantum computers will threaten Bitcoin encryption within five to ten years.
This seems to have created a degree of fear, uncertainty and doubt in the crypto AI sector, which was further exacerbated by a 16% drop that outpaced the market average losses of 10.7% on Thursday, following the FOMC meeting.
As speculation swirls, Maggie Wu, head of research at Foresight Ventures, hinted that Google’s Willow quantum computing chip is unlikely to negatively impact the crypto AI sector, as widely feared.
Crypto AI Sector Performance | December 19, 2024 | Source: Coingecko
As shown in the chart above, the crypto AI sector saw losses of 16.2% with top assets such as Render (RNDR), The Graph (GRT), and Near Protocol (NEAR) all losing in double digits.
In August 2024, Foresight Ventures issued an optimistic Crypto AI forecast report stating that “the social impact of AI x Crypto could be significant over the next 50 years”.
In an exclusive interview with FXStreet, when asked how Crypto AI projects can help mitigate the risks that Quantum computer chips pose to Bitcoin’s security architecture, Wu doubled down on his optimism.
“AI is likely to advance to unimaginable levels of capability. To successfully attack a blockchain signature scheme, quantum computers would need a significant leap in qubit count and coherence time, with several orders of magnitude still to overcome. This suggests that such threats are unlikely to become a major concern for at least the next few decades.”
Maggie Wu, Head of Research, Foresight Ventures
Crypto News Updates:
- Ark Invest Loads $3.9M in Coinbase Shares as Fed’s Hawkish Stance Stirs Market Turmoil
Ark Invest sold $3.9 million worth of Coinbase shares from its ARKF ETF after the stock fell 10% amid market turbulence sparked by Powell’s harsh remarks.
The move reflects Ark’s disciplined strategy of maintaining diversification by limiting each individual holding to 10% of the ETF portfolio.
Despite the selloff, Coinbase remains the core holding and second-largest component of the ARKF ETF.
- Fed Chairman Powell Says The Fed Is Legally Prohibited From Owning Bitcoin
Powell reaffirmed that the Fed is prohibited from owning Bitcoin under the Federal Reserve Act.
Responding to questions about President-elect Donald Trump’s proposed Bitcoin reserve, Powell emphasized the central bank’s adherence to its legal framework and lack of authority to invest in the digital asset.
Powell also clarified that there are no plans to lobby Congress for legislative changes that would allow Bitcoin ownership.
He emphasized that any review of the Fed’s asset policy would remain solely within the purview of Congress.
- El Salvador struck a deal with the IMF worth $1.4 billion, reducing the role of Bitcoin
El Salvador has reached a $1.4 billion agreement with the International Monetary Fund (IMF), signaling a significant policy shift by making Bitcoin acceptance voluntary in the private sector.
The deal also limits public sector involvement in Bitcoin, ending mandatory use of the cryptocurrency for payments and transactions.
Taxes will continue to be paid exclusively in US dollars, and the state-backed Chivo wallet operations will be phased out.
The agreement, pending approval by the IMF’s Executive Board, aims to strengthen El Salvador’s fiscal position with measures aimed at improving the primary balance by 3.5% over three years.
The country’s public debt, which peaked at 85% of GDP in 2024, is expected to decrease under this program.
An additional $3.5 billion in financing from the World Bank and regional development banks will support broader economic reforms, further limiting Bitcoin’s official role in El Salvador’s economy.
