The Shiba Inu (SHIB +4.09%) cryptocurrency has seen big sell-offs in this week's trading. The popular meme coin was down 22.7% over the last seven days of trading as of 4 p.m. ET Friday, according to data from S&P Global Market Intelligence. The token price then rose 0.5% over the next 24 hours of trading.
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Key Data Points
The cryptocurrency market saw a wave of sell-offs this week due to news from the Federal Reserve, and Shiba Inu was a part of the pullback. But even with a big valuation contraction this week, the token is still up 108% year to date as of this writing.
The Fed just gave Shiba Inu investors some bearish news
The Fed held its latest policy meeting on Wednesday and announced that it was moving forward with the widely anticipated 25-basis-point cut for the benchmark interest rate. Unfortunately, the central banking authority gave a rate outlook for 2025 that was more hawkish than many investors had expected.
Instead of planning for four rate cuts of 25 basis points next year, the Federal Reserve now expects that it will deliver only two cuts of that size. Fed Chair Jerome Powell indicated that there was a significant amount of macroeconomic uncertainty on the horizon, and that the central banking authority no longer thought that it was prudent to forecast four rate cuts in 2025.
Lower interest rates tend to make investors less risk averse. When money is cheaper to borrow, growth-dependent and speculative investments become more attractive. In response to the soft pivot on rate policy, cryptocurrencies and stocks saw big sell-offs -- and investments that are viewed as high risk were particularly hard hit.
What comes next for Shiba Inu?
Shiba Inu and the broader cryptocurrency market have seen some significant recovery momentum following the huge sell-offs driven by Wednesday's Fed meeting, but it remains to be seen how the altered outlook for interest rates will affect token valuations moving forward. If inflation data takes a turn for the worse and validates the Fed's more cautious approach, the crypto market could be in a for a new round of bearish pressures.
On the other hand, investors are hoping that the incoming Trump administration will reduce regulations and be more broadly supportive of the cryptocurrency industry. 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 will likely play the biggest roles in shaping its performance.
