Fed Cuts Rates 0.25%, Halts QT as Crypto Market Faces $795M Liquidations

Key Notes

• The central bank's 10-2 vote established a new federal funds rate of 3.75%-4.00% amid limited economic data from the government shutdown.
• Bitcoin experienced a sharp 2.55% decline following the announcement, with leveraged positions worth nearly $800 million liquidated across exchanges.
• Market analysts interpret the dovish policy shift as beneficial for digital assets long-term despite triggering immediate price volatility.

The US Federal Reserve cut interest rates by 25 basis points on Oct. 29, while announcing it will stop shrinking its balance sheet. The decision triggered significant volatility in crypto markets, with Bitcoin BTC $110 593 24h volatility: 2.0% Market cap: $2.20 T Vol. 24h: $69.82 B dropping and traders 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 decision passed with a 10-2 vote, drawing dissents from Governor Stephen Miran, who favored a larger cut, and Kansas City Fed President Jeffrey Schmid, who opposed any reduction. Treasury Secretary Scott Bessent recently confirmed five finalists to replace Powell in a shortlist for the next Federal Reserve Chair, whose term ends in 2025.

The Fed announced it will halt its balance sheet drawdown, known as Quantitative Tightening, starting Dec. 1. The central bank will reinvest proceeds from maturing mortgage-backed securities into Treasury bills, keeping total holdings steady month-to-month while shifting the portfolio composition.

Crypto Market Reaction

Bitcoin fell 2.55% to around $110,764 following the announcement, even with a social media quorum that the outcome is fundamentally good for the industry. Crypto markets recorded $795.2 million in 24-hour liquidations as leveraged positions were cleared, according to Coinglass data. Analysts noted Bitcoin was testing the Bitcoin tests $108K-$110K support zone identified in previous market analysis.

Despite short-term volatility, market participants view the dovish pivot as positive for crypto in the longer term. Exchange OKX stated the moves mean “more liquidity, more risk appetite” for digital assets. The 25-basis-point cut was widely anticipated by markets, with rate cut chances jumped to 99% following softer-than-expected inflation data released last week.

The rate decision was made amid limited economic visibility due to the ongoing federal government shutdown. Fed Chair Jerome Powell and policymakers noted “data limits” in their statement, dating their view of the unemployment rate to August, the last month with official jobs data available before the shutdown began.

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