Panic Selling Following Fed Rate Cut Driven by Short-Term Traders
Recent data indicates that the sharp decline in Bitcoin's value after the Federal Reserve's interest rate reduction was primarily caused by short-term traders rather than long-term holders.
On October 29, after the Federal Reserve announced an interest rate cut, Bitcoin (BTC) experienced a sudden price decline, which led traders to transfer over 10,000 BTC to Binance. This situation raised speculation about whether it was merely a reactive sell-off in response to the news or the onset of a prolonged bearish market event.
According to a recent analysis by CryptoQuant, the majority of the selling activity was attributed to a specific demographic: traders who had possessed their Bitcoin for less than 24 hours.
Key Findings in the Data
Following the Fed’s rate cut announcement of 0.25%, Bitcoin’s price dropped from approximately $112,000 to a low of about $106,500 as recorded by CoinGecko. This significant change triggered a wave of more than $1.1 billion in liquidation across various trading positions.
The preliminary evidence suggested a negative shift in market sentiment, reinforced by the influx of BTC into Binance on October 30—an occurrence that typically signals impending sales.
However, an on-chain metric named Spent Output Age Bands (SOAB) provided crucial context. This metric categorizes Bitcoin transactions based on how long they have remained static before being relocated. The findings indicated that 10,009 BTC from the October 30 Binance inflow were exclusively from units held for less than 24 hours.
“This is the signature of ‘hot money’—short-term traders and speculators reacting instantly to the news,” remarked the analyst.
Further analysis differentiated this behavior from that of long-term investors. “In stark contrast, the inflow from long-term holders (coins aged 6+ months) was negligible. The market’s ‘diamond hands’ stood firm.” This suggests that the pressure to sell did not originate from the core investor base that has accumulated Bitcoin over time but was instead led by more transient market participants, reacting to headlines rather than long-term strategies.
A Trend of Short-Term Panic
Amr Taha, another analyst, noted a similar trend among short-term traders on Binance, who sold roughly $1 billion in Bitcoin on October 30. This was coupled with significant outflows from Bitcoin ETFs earlier, particularly from major funds such as BlackRock and Fidelity.
Such a combination of selling from exchange users and ETF investors has historically indicated the possibility of a local market bottom being established due to panic, as opposed to the onset of a continuous downturn.
As of the current report, Bitcoin is valued at around $109,725, reflecting a 0.9% drop over the past 24 hours and decreases of about 1% for the week and 4% for the month, though it has still increased by over 52% in the past year.
