Key Notes
- The central bank’s 10-2 vote set a new federal funds rate of 3.75% to 4.00% amid limited economic data resulting from the government shutdown.
- Bitcoin saw a sharp decline of 2.55% following the announcement, with leveraged positions worth nearly $800 million liquidated on exchanges.
- Market analysts interpret the accommodative policy change as beneficial for digital assets in the long term, despite immediately triggering price volatility.
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 crypto markets, with Bitcoin
BTC
$111,455
24h volatility:
0.9%
Market capitalization:
$2.22T
Flight. 24h:
$67.69 billion
drops and traders record hundreds of millions of liquidations.
The rate cut lowered the federal funds rate to a range of 3.75% to 4.00%, according to Reuters. The decision passed 10-2, drawing dissent from Gov. Stephen Miran, who favored a deeper reduction, and Kansas City Fed President Jeffrey Schmid, who opposed any reduction. Treasury Secretary Scott Bessent recently confirmed five finalists to replace Powell on the shortlist for the next Federal Reserve chairman, whose term ends in 2025.
The Fed announced that it would end its balance sheet reduction, known as quantitative tightening, starting December 1. The central bank will reinvest proceeds from maturing mortgage-backed securities into Treasury bills, thereby keeping total holdings stable from month to month while changing the composition of the portfolio.
Crypto Market Reaction
Bitcoin fell 2.55% to around $110,764 following the announcement, even with a quorum on social media that the outcome is fundamentally good for the industry. Crypto markets saw $795.2 million in liquidations over 24 hours as leveraged positions were cleared, according to Coinglass data. Analysts noted that Bitcoin was testing the Bitcoin testing support zone of $108,000 to $110,000 identified in previous market analysis.
Crypto Market Liquidations | Source: Coinglass
Despite the short-term volatility, market participants view the dovish pivot as positive for the crypto in the long term. Exchange OKX said these measures meant “more liquidity, more risk appetite” for digital assets. The 25 basis point cut was widely anticipated by markets, with the odds of a rate cut jumping to 99% following weaker-than-expected inflation data released last week.
The rate decision was made amid limited economic visibility due to the ongoing federal government shutdown. Fed Chairman Jerome Powell and policymakers highlighted “data limitations” in their statement, dating their view of the unemployment rate to August, the last month for which official employment data was available before the shutdown began.
following
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article is intended to provide accurate and current information, but should not be considered financial or investment advice. Because market conditions can change quickly, we encourage you to verify the information for yourself and consult a professional before making any decisions based on this content.
As a Web3 Marketing Strategist and former DuckDAO CMO, Zoran Spirkovsky translates complex crypto concepts into compelling stories that drive growth. With a background in crypto journalism, he excels in developing go-to-market strategies for DeFi, L2, and GameFi projects.
Zoran Spirkovsky on X
