The Shiba Inu (CRYPTO: SHIB) cryptocurrency has seen major sell-offs during this week’s trading. The popular meme coin is down 22.7% over the past seven trading days as of 4:00 PM ET on Friday, according to data from S&P Global Market Intelligence. The token price then rose by 0.5% over the next 24 trading hours.
The cryptocurrency market saw a wave of sell-off this week due to news from the Federal Reserve, and Shiba Inu was part of this pullback. But even with a big drop in value this week, the token is still up 108% this year at the time of writing.
The Fed held its latest policy meeting on Wednesday and announced that it is making progress on the widely expected 25 basis point cut in interest rates. Unfortunately, the central bank authority gave interest rate forecasts for 2025 that were more aggressive than many investors expected.
Instead of planning four rate cuts of 25 basis points next year, the Federal Reserve now expects to make only two rate cuts of that magnitude. Fed Chairman Jerome Powell indicated that a significant amount of macroeconomic uncertainty lies ahead, and that the central bank authority no longer considered it prudent to forecast four rate cuts in 2025.
Lower interest rates generally make investors less risk averse. When it is cheaper to borrow money, growth-dependent and speculative investments become more attractive. In response to the soft turn on interest rate policy, cryptocurrencies and stocks saw big sell-offs – and investments considered high risk were particularly hard hit.
Shiba Inu and the broader cryptocurrency market have seen significant recovery momentum following the massive sell-off following Wednesday’s Fed meeting, but it remains to be seen how the changed outlook for interest rates will impact token valuations going forward. If inflation data takes a negative turn and confirms the Fed’s more cautious approach, the crypto market could be in for another round of bearish pressure.
On the other hand, investors are hoping that the new Trump administration will reduce regulations and support the cryptocurrency industry more broadly. While there are some project-specific catalysts that could shape Shiba Inu’s performance in 2025 and beyond, it appears that macroeconomic and political factors are likely to play the largest role in shaping its performance.
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Keith Noonan has no positions in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Shiba Inu Is Sinking This Week was originally published by The Motley Fool
