Bitcoin Slumps After Fed Rate Cut As Traders Fall into ‘Buy the Rumor, Sell the News’ Trap

As Bitcoin fell below $108,000, Santiment spotted rising shorts and whale accumulation.

The Federal Reserve’s widely anticipated 0.25% rate cut on Wednesday sparked a wave of volatility across traditional and crypto markets. Powell’s cautious remarks spooked crypto markets as Bitcoin briefly fell below $108,000 in a classic “buy the rumor, sell the news” scenario.

But historical trends suggest rebounds after such crowd capitulation.

Crypto turns cautious

Santiment, in its latest update, said Bitcoin’s decline following Jerome Powell’s hawkish tone reflected excessive optimism that had built up before the announcement. Traders had priced in dovish messaging and further easing through the end of the year, but Powell’s warning that a further cut in December is “not guaranteed” abruptly turned sentiment around.

BTC plunged below $110,000 as traders who had positioned themselves for a dovish outcome began unwinding their long positions. On-chain data showed a notable increase in FX flows and a cooling in funding rates, meaning leveraged traders were caught off guard by the Fed’s tone.

Social sentiment has also turned sharply negative and discussions around “rate cuts,” “Powell,” and “the Fed” have dominated crypto-related discussions. Historically, Santiment observed, these surges in crowd attention and fear have often coincided with short-term price bottoms, suggesting a possible setup for a rebound once the panic subsides.

The firm reported that Bitcoin’s correlation with stocks weakened immediately after Powell’s comments, while its behavior more closely aligned with that of gold. Experts believe, however, that this is a temporary defensive shift on the part of investors seeking stability in a context of political uncertainty.

Across the crypto market, altcoins tracked Bitcoin’s performance, with the total market cap declining slightly as traders reassessed their expectations for liquidity expansion. However, the crypto analytics firm highlighted that funding rates on major exchanges have now normalized, meaning excessive leverage has been eliminated. This should pave the way for more organic recoveries.

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The firm also detected slight accumulation behavior among large holders, with some whales taking advantage of the post-FOMC decline. For now, BTC’s price structure remains intact above key support levels, but sentiment remains cautious.

What’s next for Bitcoin?

Santiment said that if short positions begin to develop over the next few trading sessions, it could create conditions for a short squeeze, potentially pushing Bitcoin towards the $115,000 area. In the near term, volatility is likely to remain elevated as traders digest the Fed’s tone.

In a statement to CryptoPotatoanalysts at crypto trading platform Bitunix said Bitcoin’s near-term outlook remains cautious. Although downside risks remain if support fails, the presence of strong liquidity clusters and ongoing rebalancing could help stabilize price action.

“Bitcoin’s liquidation heat map shows key support between $109,600 and $108,000 – a breakdown below could trigger cascading liquidations – while resistance lies between $112,300 and $116,000. With liquidity re-allocating and the dollar regaining strength, the crypto market could enter a volatile consolidation phase. In the short term, investors should remain alert to safe-haven flows driven by macro-political uncertainty, as markets move towards a new stage of “structural repricing”.