The Federal Reserve’s anticipated 0.25% interest rate reduction caused notable turbulence in both conventional and crypto markets. Concerns were heightened by Powell’s remarks, leading Bitcoin to briefly fall below $108,000 in a classic reaction of ‘buy the rumor, sell the news.’ Historical trends suggest potential rebounds following such market anxieties.

Market Reacts to Rate Cut

According to Santiment’s latest insights, the decline in Bitcoin’s price following Jerome Powell’s strict comments indicates a scenario where excessive optimism had built up before the announcement. Traders had expected a more lenient approach from the Fed, which led to significant market adjustments when Powell warned that another rate cut in December wasn’t ensured.

Bitcoin crashed under $110,000 as many traders exited their long positions in panic, while on-chain data indicated increased exchange inflows and a decrease in funding rates—suggesting that leveraged traders were caught unexpectedly by the Fed’s stance.

Sharp negativity in social sentiment followed, with discussions focused on terms like ‘rate cut,’ ‘Powell,’ and ‘Fed.’ Historically, such spikes in public attention and fear have frequently been associated with temporary price bottoms, hinting at an opportunity for recovery once the panic settles.

Santiment observed a decrease in Bitcoin’s correlation with stocks right after Powell’s comments, while its movements became more synchronized with gold. Experts believe this shift may be fleeting as investors opt for stability amidst policy uncertainties.

Across the entire crypto landscape, altcoins mirrored Bitcoin’s downturn, and the total market capitalization saw a slight decrease as traders reassessed expectations for liquidity expansion. However, the crypto analytics firm noted that funding rates across leading exchanges have normalized, implying that excessive leverage has been removed. This could provide a foundation for more sustainable recoveries.

Future Outlook for Bitcoin

Santiment warned that a rise in short positions could precipitate a short squeeze, possibly pushing Bitcoin back towards the $115,000 level in the near future. For now, high volatility is projected as traders absorb the implications of the Fed’s messaging.

In a statement to CryptoPotato, the analysts from the crypto trading platform Bitunix remarked that while Bitcoin’s short-term future looks cautious with persistent downward risks if key supports fail, existing strong liquidity and ongoing adjustments might stabilize trading patterns.

“Bitcoin’s liquidation heatmap indicates essential support between $109,600-$108,000; any drop below this line could result in cascading liquidations. Conversely, resistance levels are seen near $112,300 and $116,000. The market might undergo uneven consolidation as liquidity is reallocated and the dollar strengthens. In the short run, investors need to remain vigilant to safe-haven flows influenced by macroeconomic policies, as we transition into a new stage of ‘structural repricing.’”