Key notes
- The central bank’s 10-2 vote created a new federal funds rate of 3.75%-4.00% amid limited economic data from the government shutdown.
- Bitcoin saw a sharp decline of 2.55% following the announcement, with nearly $800 million worth of leveraged positions liquidated across exchanges.
- Market analysts interpret the dovish policy shift as beneficial for digital assets in the long term despite causing immediate price fluctuations.
The US Federal Reserve cut interest rates by 25 basis points on October 29, while announcing that it would stop shrinking its balance sheet. The decision sparked significant volatility in cryptocurrency markets, including Bitcoin
Bitcoin
$111,455
24-hour fluctuations:
0.9%
Market value:
$2.22 T
Vol. 24 hours:
$67.69 billion
Decline and traders are recording hundreds of millions in liquidations.
The rate cut lowered the federal funds rate to a range of 3.75%-4.00%. According to Reuters. The resolution was approved by a vote of 10 to 2, drawing opposition from Governor Steven Meyran, who favored a larger cut, and Kansas City Federal Reserve Bank President Jeffrey Schmid, who opposed any cut. Treasury Secretary Scott Besent recently confirmed there are five finalists to replace Powell on the shortlist for the next Fed chair, whose term ends in 2025.
The Fed announced that it will stop balance sheet tightening, known as quantitative tightening, effective December 1. The central bank will reinvest the proceeds from outstanding mortgage-backed securities into Treasury securities, keeping total holdings constant from month to month as the portfolio composition changes.
Crypto market reaction
Bitcoin fell 2.55% to about $110,764 after the announcement, even as social media circulated that the result was fundamentally good for the industry. Cryptocurrency markets recorded $795.2 million in liquidations over a 24-hour period as leveraged positions were liquidated, according to Coinglass data. Analysts noted that Bitcoin was testing the $108,000-$110,000 support area identified in previous market analysis.
Crypto Market Clearance | source: Quinglass
Despite the short-term volatility, market participants view the cautious pivot as a positive for cryptocurrencies in the long term. The OKX exchange stated that these moves mean “more liquidity and more risk appetite” for digital assets. The 25 basis point cut was widely expected by markets, as chances of a rate cut jumped to 99% following the release of weaker-than-expected inflation data last week.
The price decision was made amid limited economic visibility due to the ongoing federal government shutdown. Fed Chair Jerome Powell and policymakers cited “data limits” in their statement, dating their view of the unemployment rate back to August, the last month for which official jobs data is available before the shutdown began.
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Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to provide accurate and timely information but should not be considered financial or investment advice. Since market conditions can change rapidly, we encourage you to verify the information yourself and consult with a professional before making any decisions based on this content.
As a Web3 marketing strategist and former DuckDAO CMO, Zoran Spirkovski translates complex coding concepts into compelling narratives that drive growth. With a background in cryptocurrency journalism, he excels at developing go-to-market strategies for DeFi, L2, and GameFi projects.
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