The cryptocurrency market is witnessing a day of major sell-offs in Thursday trading. BitcoinThe token price fell 4.8% as of 4:00 p.m. ET compared to the last 24 hours of trading EthereumThe price fell by 9.2% during the reporting period. The drop in valuation was even more noticeable in the altcoin space.

The popular meme token Shiba Inu (SHIB -26.07%) recorded a price decline of 11.5% on the last trading day. In the meantime, Cardano (ADA -23.77%) was also down 11.5% over the entire route, and chain link (LINK -22.49%) fell by 13.2%.

Shiba Inu is losing ground amid a wave of sell-offs impacting the broader crypto market. Cryptocurrency prices are experiencing a sharp decline after the US Federal Reserve announced yesterday that the macroeconomic situation in 2025 is less optimistic. Amid concerns that inflationary pressures could persist, it now looks like rate cuts will come more slowly than previously expected.

Why is the Fed’s interest rate decision pushing altcoins lower?

At its meeting yesterday, the Fed announced that it would move forward with a 25 basis point rate cut. The cut marked the central bank’s third interest rate cut since September, bringing the key interest rate down to 4.25%. The move was in line with market expectations, but Chairman Jerome Powell’s comments shocked the market and halted the recent surge in bullish momentum that has driven up valuations of cryptocurrencies and speculative stocks.

Powell noted that the recently announced rate cut was not an easy decision and signaled that the Fed would take a more cautious approach to rate cuts in 2025. The Federal Reserve said it now expects only two more rate cuts of 25 basis points each next year, down from its previous forecast of four cuts at that level. Lower interest rates have typically been a bullish catalyst for cryptocurrencies, and the less favorable interest rate outlook is causing significant sell-offs in Shiba Inu, Cardano, Chainlink, and other tokens.

What’s next for Shiba Inu, Cardano and Chainlink?

Even after the recent setbacks, the Shiba Inu token price is up about 107% in 2024 trading. These gains were largely driven by speculative investing, meme coin momentum, and expectations that the new Trump administration will take steps that promote crypto market growth.

While the change in presidential administration and the change in the makeup of Congress next year could be catalysts that could drive up the price of the Shiba Inu token, investors should keep in mind that the token’s rally this year is not driven by fundamentals became. Therefore, if macroeconomic conditions worsen or other disruptive risk factors come into focus, it is reasonable to assume that the cryptocurrency could face significant downward pressure.

Cardano and Chainlink’s performance will likely be influenced by the same macroeconomic dynamics that shape results for Shiba Inu. Lower interest rates mean it is cheaper for investors to borrow money. This, in turn, can make it more attractive to borrow money and put it into relatively risky investments to achieve explosive returns. Lower interest rates also mean companies can borrow money more cheaply and then invest that capital in growth initiatives, which can contribute to gains for the overall stock market – but also for other speculative asset classes.

On the other hand, Cardano and Chainlink also have more sound fundamental valuation cases compared to Shiba Inu. While Shiba Inu is primarily a meme token with a limited scope outside of payments and speculative investing, both Cardano and Chainlink are supported by networks with a focus on facilitating other projects and applications. That doesn’t necessarily mean they will outperform Shiba Inu, but it does suggest that there are a larger number of factors that could influence their respective ratings.

In the short term, there is a good chance that the valuations of the top altcoins and the crypto market as a whole will continue to be very volatile. Investors are still weighing the impact of next year’s interest rate against potential benefits from regulatory changes under the new Trump administration, and token prices could see further big swings.