Due to concerns over persistent high inflation after Trump took office, the Federal Reserve is expected to cut interest rates twice in 2025, which is hawkish.the Federal Open Market Committee(FOMC) meetings have released conservative interest rate cut signals, directly triggering a decline in all risk assets, with meme coins and altcoins experiencing particularly significant drops.

The characteristics of altcoins make them particularly vulnerable in a tight funding environment, as many altcoins lack an ecosystem and have limited practical use cases, leading to a lack of endogenous growth momentum; FDV is too high, with little wealth effect; the unlocking period for institutional holders further increases selling pressure in the market.

Therefore, the rise of altcoins requires capital support; under the backdrop of significantly weakened interest rate cut expectations, institutional funds are primarily focused on Bitcoin (BTC), with BTC prices slightly declining, while altcoins have experienced substantial drops.

Analysts at StarEx Exchange believe that the excessively optimistic market expectations are a significant reason for the plunge; although the immediate trigger was the Federal Reserve's hawkish statements, the deeper reason for the market's sharp decline lies in the previous excessive bullish sentiment. Since Trump announced his candidacy, risk assets (especially Bitcoin) have experienced a significant unilateral rise, making the market highly susceptible to any negative news.

The Trump team's economic policy promotes lowering tax burdens and driving fiscal stimulus, which has sparked expectations for interest rate cuts and liquidity release in the capital markets. However, the Federal Reserve significantly lowered interest rate cut expectations in the latest meeting, which is obviously contrary to the market's optimistic sentiment. The USA is currently facing a complex economic environment of 'high debt, high tariffs, high exchange rates, and high interest rates.' The capital markets have high hopes for Trump's ability to quickly resolve these issues after taking office, but recently, the USA House of Representatives voted down the funding and debt ceiling bills supported by Trump's team, further intensifying market concerns.

Why is the Federal Reserve unwilling to quickly cut interest rates? Its core function is to maintain inflation at a reasonable level while protecting the global credit of the dollar. The policy inclination of Trump’s team may lead to a resurgence of inflation, while increasing the debt ceiling and fiscal expansion would negatively impact the dollar's credit. This contradiction has led to a policy conflict between the Federal Reserve and the government.

However, historical data shows that market predictions often deviate from actual results. For example:

By the end of 2021, the market expected three interest rate hikes in 2022, but ultimately there were seven; by the end of 2022, the market expected one interest rate hike in 2023, but ultimately there were four; by the end of 2023, the market expected six interest rate cuts in 2024, but there were actually four.

Therefore, predictions may not always be accurate. In the event of an economic recession or financial crisis in the future, the Federal Reserve may be forced to adopt aggressive monetary policies, such as emergency rate cuts or restarting Algo.

Analysts at StarEx believe that although altcoins are under pressure in the short term, their long-term performance may experience explosive growth due to the gradual improvement of the ecosystem and changes in the macroeconomic environment. If a black swan event occurs in 2025, such as an economic recession or financial crisis, the Federal Reserve may have to urgently cut interest rates or restart Algo. This would significantly improve the liquidity environment, providing upward momentum for the altcoin market. Although many altcoin ecosystems are currently weak, some projects are actively expanding their application scenarios. For example, decentralized finance (DeFi), NFT markets, and other fields may provide sustained demand growth for altcoins.

Currently, it is the Christmas holiday, and with the 2024 fiscal year coming to a close, market trading activity has decreased. In this environment, the market may undergo a low volatility bottoming phase, and it is even possible that large-scale liquidation events may occur. For investors, continuing to wait or buying on dips in the short term is a more prudent strategy.