The Federal Reserve’s widely expected 0.25% rate cut on Wednesday triggered a wave of volatility across both traditional and crypto markets. However, Jerome Powell’s cautious remarks spooked crypto investors, causing Bitcoin to briefly dip below $108,000 in a classic “buy the rumor, sell the news” scenario. Despite this sharp reaction, historical patterns suggest rebounds often follow such crowd capitulation.
**Crypto Turns Cautious**
In its latest update, Santiment noted that Bitcoin’s decline following Powell’s hawkish tone reflected an overextension of optimism that had built up ahead of the announcement. Traders had largely priced in a dovish message and anticipated further easing through year-end. Powell’s warning that another rate cut in December is “not guaranteed” abruptly flipped sentiment.
As a result, BTC plunged below $110,000 as traders positioned for a dovish outcome began unwinding their longs. On-chain data revealed a notable increase in exchange inflows and a cooling in funding rates, indicating leveraged traders were caught off guard by the Fed’s tone. Social sentiment also turned sharply negative, with discussions around “rate cut,” “Powell,” and “Fed” dominating crypto-related chatter.
Historically, Santiment observed, these surges in crowd attention and fear often coincide with short-term price bottoms, suggesting a possible rebound once panic subsides. Additionally, the firm reported that Bitcoin’s correlation with equities weakened immediately after Powell’s comments, while its behavior aligned more closely with gold. Experts believe this shift is a temporary defensive move by investors seeking stability amid policy uncertainty.
**Altcoins and Market Capitalization**
Across the broader crypto market, altcoins followed Bitcoin’s move, leading to a modest decline in total market capitalization as traders reassessed expectations for liquidity expansion. However, Santiment pointed out that funding rates across major exchanges have now normalized, meaning excessive leverage has been flushed out. This cleaning of leverage is expected to set the stage for more organic recoveries.
The firm also detected mild accumulation behavior among large holders, with some whales taking advantage of the post-FOMC dip. As of now, Bitcoin’s price structure remains intact above key support levels, but overall sentiment stays cautious.
**What’s Next For Bitcoin?**
Santiment highlighted that if short positions start to build in the coming trading sessions, it could create conditions for a short squeeze, potentially pushing Bitcoin back toward the $115,000 zone. In the near term, volatility is expected to remain high as traders continue to digest the Fed’s stance.
Analysts at crypto trading platform Bitunix shared a similarly cautious outlook in a statement to CryptoPotato. They noted that while downside risks exist if support levels fail, strong liquidity clusters and ongoing rebalancing may help stabilize price action.
“Bitcoin’s liquidation heatmap shows key support between $109,600 and $108,000. A breakdown below this range could trigger cascading liquidations, while resistance lies near $112,300 and $116,000,” the Bitunix analysts explained. “With liquidity being reallocated and the dollar regaining strength, the crypto market may enter a phase of choppy consolidation. In the short term, investors should stay alert to safe-haven flows driven by macro-policy uncertainty, as markets transition into a new stage of structural repricing.”
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**Related Reads:**
– Bitcoin (BTC) Plunges Before the FOMC Meeting, Pi Network (PI) Soars by 15%: Market Watch
– Over $700M in Liquidations as BTC and ETH Sink After Fed Rate Cut
– Bitcoin’s Dip-Buying Sentiment Surges; Here’s Why It Could Backfire
As the market adjusts to the Fed’s latest moves, cautious optimism paired with vigilant risk management remains the prudent approach for crypto investors.
https://cryptopotato.com/bitcoin-crashes-after-fed-rate-cut-as-traders-fall-for-buy-the-rumor-sell-the-news-trap/