Fed Cuts Rates to 3.5%–3.75%; Bitcoin Falls Below $90K Amid Liquidity Move
The Federal Reserve reduced its benchmark rate by 25 basis points to 3.5%–3.75% — its third cut this year — citing slowing job gains and persistent goods inflation. The Fed signalled only one more cut expected in 2026 and announced $40 billion in short-term Treasury bill purchases beginning Dec. 12 to shore up bank reserves and liquidity. Chair Jerome Powell framed the move as a cautious, controlled pivot rather than aggressive easing. Markets reacted unevenly: equities remained near highs while cryptocurrencies sold off. Bitcoin dropped below $90,000, triggering heavy long liquidations and elevated volatility; analysts highlight a near-term risk zone around $88K–$90K for further liquidations. Ethereum and many altcoins underperformed (ETH noted around $3,192–$3,300 in differing reports, with one snapshot showing ~4% 24h decline). The FOMC vote was not unanimous in earlier reporting, and ahead-looking Fed commentary plus upcoming CPI and employment prints will be key directional cues. For traders: expect heightened short-term downside risk and volatility in crypto, potential cascades of liquidations in leveraged BTC positions, and an uncertain longer-term outlook tied to inflation, labor data, and whether liquidity injections expand beyond the announced T-bill purchases.
Bearish
The Fed’s 25-basis-point rate cut plus $40bn of T-bill purchases increases near-term liquidity but was presented as a cautious, limited pivot — not aggressive easing. Markets interpreted the move as mixed, and crypto traders reacted with risk-off positioning. Bitcoin fell below $90K and triggered heavy long liquidations, which is a direct negative price impact and raises near-term downward pressure. Ethereum and many altcoins also declined, reflecting correlation with BTC and heightened deleveraging. Short-term implication: elevated volatility, increased probability of additional forced liquidations around the $88K–$90K BTC range, and downside risk for leveraged positions. Medium-to-long-term: the effect is ambiguous — if inflation continues to soften and the Fed eases further or expands liquidity, risk assets including crypto could regain upside; conversely, if labor or CPI data reaccelerate inflation, liquidity expectations may retrench, keeping pressure on prices. Traders should watch upcoming CPI and employment releases, Fed commentary, and actual execution/expansion of liquidity operations to gauge whether the environment turns supportive or remains contractionary.