The Bitcoin and Ethereum markets experienced significant volatility on Wednesday after the US Federal Reserve announced a further 0.25% interest rate cut. While this was a much-anticipated rate reduction, the accompanying message indicated that the Fed is setting very high standards for any further easing, causing a rapid shift in investor sentiment.
According to the Federal Open Market Committee (FOMC), the benchmark interest rate was lowered to 3.5%–3.75% with a 9–3 vote. The two regional Fed presidents opposed the cut, while Governor Stephen Miran even wanted to push for a 50 basis point reduction. The initial market reaction was quite positive, but prices soon began to weaken as traders realized the Fed was using phrases often seen before periods of adjustment pauses, including a Capital to “carefully assess new economic data” before making further decisions.
Despite the Fed's cautious stance, CME's FedWatch tool – which uses interest rate Futures Contract to measure the probability of a cut – currently shows about a 40% chance that the Fed will further cut by 0.25% at its March meeting next year. This keeps expectations of easing open, but not strong enough to trigger a significant inflow of money into riskier assets immediately.
The price of Bitcoin subsequently plummeted from $93,200 to $89,700, while Ethereum fluctuated similarly. Other major cryptocurrencies like Solana, XRP , and BNB followed this pattern of volatility, reflecting market sentiment that is extremely sensitive to policy signals.
Volatility increased further when the Fed announced it would restart its Treasury bill purchase program, planning to buy $40 billion as early as December 12th. Analysts often refer to this move as "QE-lite," similar to the program the Fed implemented in late 2019 to stabilize liquidation in the banking system.
Against this backdrop, many blockchain analytics firms remain optimistic about Bitcoin's medium-term prospects. CryptoQuant's research division predicts that if the Fed shifts to a more dovish tone and BTC breaks through two key resistance levels at $99,000 and $102,000, the rally could extend to $112,000. Research director Julio Moreno emphasized that the market is not just looking at how much the Fed cuts, but more importantly, "how quickly the Fed will signal a reduction over the next year and where inflation expectations will be directed." However, the somewhat "pause-oriented" language in the latest announcement may complicate this outlook.
Many other market experts assess the Fed's move as not as hawkish as initially feared, but still not enough to dispel uncertainty. Nic Puckrin, investment analyst and co-founder of Coin Bureau, said the initial relief in Bitcoin and stock prices stemmed from the Fed not sending the hawkish message investors feared. However, the Fed's forecasts still only mention one rate cut next year – a number lower than market expectations – are dampening the enthusiasm.
He argued that the Chia within the FOMC continue to create new layers of risk for the macroeconomic outlook, limiting the growth potential of risky assets later this year.
