The Federal Reserve (Fed) cut the interest rate on Wednesday by 25 basis points, lowering the federal funds rate to a range of 4.25%.

The decision to cut rates by 25 basis points aligned with the expectations of market participants. However, the cryptocurrency market fell after the Fed's decision.

This is because the market reaction may not be linked to the rate cut decision for December, but rather to the outlook for 2025.

Fed Chairman Jerome Powell indicated that the central bank revised its outlook for 2025 and reduced potential cuts from 4 to 2. This suggests a more hawkish outlook for the new year, causing a massive sell-off across the cryptocurrency market.

Additionally, the Fed raised its PCE inflation expectations from 2.1% to 2.5% by the end of 2025, indicating that inflation could rise in the new year.

It could also affect the current bullish rally that the cryptocurrency market has been experiencing, as investors now anticipate unfavorable market activity in the coming year.

After the announcement, Bitcoin dropped to $100,314, falling 5.4% while the entire cryptocurrency market reduced its market capitalization by $200 million.

Most major altcoins fell along with Bitcoin, including Ethereum, which has dropped more than 6% in the last 24 hours.

Other tokens include XRP, Solana, and Dogecoin, which have decreased by 10%, 7%, and 9%, respectively.

The recent drop triggered liquidations worth $675 million in the last 24 hours, with Bitcoin and Ethereum witnessing long liquidations of over $100 million each.

The stock market also began to experience losses, with the S&P 500 sharply falling after the Fed's decision, indicating a close correlation between cryptocurrencies and stocks in response to the Federal Reserve's decisions.