by Coinstrooper Crypto Articles
Quick Take
  • This rate cut happened despite the federal government shutdown, which has limited access to critical data.
  • The decision came hours after the Bank of Canada delivered its own 25-basis-point cut to 2.25%.
  • Markets reacted with immediate volatility, with $300 million liquidated from crypto markets within 15 minutes of Fed Chair Jerome Powell’s FOMC speech.
  • The Fed’s statement repeated its assessment that “job gains have slowed“.

What Happened

However, Bitcoin subsequently recovered to hold above $112,000 as traders digested the implications of the rate cut and the Fed’s announcement to end quantitative tightening on December 1.

Fed Chair Jerome Powell’s comment that a December rate cut is “far” from certain further dampened expectations for additional easing, despite CME FedWatch data showing investors still favor another quarter-point reduction at the year’s final meeting.

Bitcoin’s historical pattern around FOMC meetings reveals consistent 6-8% declines following the last three announcements in June, July, and September before recovering to new all-time highs.

Market Context

The Federal Reserve reduced its benchmark interest rate by 25 basis points to a range of 3.75%-4% on Wednesday, marking the second consecutive rate cut as policymakers seek to support a softening labor market amid ongoing economic uncertainty.

Markets reacted with immediate volatility, with $300 million liquidated from crypto markets within 15 minutes of Fed Chair Jerome Powell’s FOMC speech.

Rate Cut Meets Market Skepticism

The central bank’s decision to halt balance sheet reduction after shedding more than $2 trillion in assets since 2022 indicates growing concern about liquidity conditions in money markets, with the balance sheet now below $6.6 trillion for the first time since 2020.

According to Bloomberg, the shutdown is freezing most economic data releases, forcing officials to reference unemployment figures only “through August” and rely on delayed reports like September’s consumer price index, which showed core inflation rising 3% year-over-year, well above the 2% target.

However, analyst Wilberforce Theophilus cautioned that markets had already priced in either no cut or a 25-basis-point reduction.

Ehsani emphasized that sustainability depends on follow-through from both macro policy and market demand, with technical resistance at $116,000-$117,000 and potential upside targets of $126,000-$130,000 by year-end.

Why It Matters

It acknowledged that “risks to employment rose in recent months,” while characterizing inflation as having “moved up since earlier this year and remains somewhat elevated.”

He also projects that Bitcoin could climb to $1 million within 4 to 8 years and eventually reach $20 million over a 20-year horizon, assuming 30% annual growth.

He argues that significant rallies would only materialize with unexpected moves of 50-75 basis points or a shift from quantitative tightening to quantitative easing, which he called “more important than the rate cut.”

Details

The 10-2 vote revealed significant division within the FOMC, with Governor Stephen Miran dissenting in favor of a larger 50-basis-point cut while Kansas City Fed President Jeff Schmid opposed any reduction at all.

This rate cut happened despite the federal government shutdown, which has limited access to critical data.

The decision came hours after the Bank of Canada delivered its own 25-basis-point cut to 2.25%.

The Fed’s statement repeated its assessment that “job gains have slowed“.

The ongoing government shutdown has severely hampered the Fed’s policy deliberations, with the Fed chair saying it “will affect the economy” if it continues.

Bitcoin Bulls Eye $150k Despite Near-Term Headwinds

MicroStrategy Chairman Michael Saylor predicted Bitcoin will reach $150,000 by year-end, calling it “the consensus of the equity analysts that cover our company and the Bitcoin industry right now.”

Speaking with Cryptonews, VALR CEO Farzam Ehsani characterized Bitcoin’s recovery above $115,000 as “more than just another relief rally,” citing on-chain data showing whale wallets holding 10,000-100,000 BTC accumulated over 45,000 BTC since the October crash.

He noted that the rally has been driven by “measured spot absorption and mild short covering” rather than high-leverage momentum trades.

However, he warned the rally remains “structurally dependent on whales and institutional desks” without broader retail participation and ETF inflows.

Technical Analysis Points to Near-Term Correction