Bitcoin (BTC), the top cryptocurrency by market capitalization, experienced a decline following the Federal Reserve’s recent interest rate reduction. This drop appears to stem from the Fed’s communication, which has dampened traders’ enthusiasm for future monetary easing.
On Wednesday, as anticipated, the Fed lowered its benchmark interest rate by 25 basis points to 3.25% and announced plans to purchase short-term Treasury bills aimed at managing liquidity within the banking sector.
Despite these measures, Bitcoin traded below $90,000 at the time of reporting—a 2.4% decrease since early trading in Asia according to CoinDesk data. Meanwhile, Ether fell by 4% to $3,190 and the CoinDesk 20 Index dropped over 4%.
The cautious market reaction likely reflects emerging divisions within the Fed regarding how best to balance inflation control with employment objectives. Additionally, indications suggest that future rate cuts may be more limited than previously expected.
During Wednesday’s meeting, two members voted against any change in rates; moreover, forecasts revealed that six FOMC participants considered further cuts inappropriate at this stage.
The central bank also signaled only one additional rate cut in 2026—falling short of market expectations for two or three reductions.
“The Federal Reserve is divided internally,” Greg Magadini—director of derivatives at Amberdata—explained to CoinDesk. “Markets lack clear guidance on interest rates until May 2026 when Chairman Jerome Powell is set to be replaced. The appointment of a Trump-aligned successor who favors aggressive rate cuts could provide clearer direction; however there are still six months remaining before this transition.”
Magadini added that a probable scenario involves a necessary “deleveraging” or downward market movement convincing policymakers toward lowering rates decisively.
Shiliang Tang from Monarq Asset Management noted that Bitcoin’s price action mirrors declines seen in stock markets.
“Initially crypto surged on news but then steadily declined alongside stock futures,” Tang told CoinDesk. “BTC tested but failed thrice over two weeks to surpass its local peak near $94k.”
Tang further observed implied volatility has continued drifting lower now that major catalysts for this year have passed.
Focus on Liquidity Management Rather Than Quantitative Easing
The crypto community quickly labeled the Fed’s reserve management initiative as traditional quantitative easing (QE) reminiscent of policies fueling excessive risk-taking during 2020-21; however this characterization may not be accurate.
This program entails purchasing $40 billion worth of short-term Treasury bills primarily aimed at alleviating liquidity pressures in money markets rather than expanding balance sheets extensively or suppressing yields long term.
Classic QE involved buying long-duration Treasuries and mortgage-backed securities aggressively lowering long-term borrowing costs while injecting trillions into financial markets—directly supporting speculative investments through increased liquidity availability.
Andreas Steno Larsen—the founder of Steno Research—aptly summarized it on X: “This isn’t Lambo QE sadly; it’s more like ‘my Uber is seven minutes away’ QE.”
Certain analysts view this latest move as preventive action designed to avoid instability similar to what occurred in money markets back in 2019.
A pseudonymous commentator known as EndGame Macro explained: “Rather than risking another frantic scramble like we saw in ’19,the Fed is quietly building cushions now ensuring enough breathing room so financial systems can navigate spring without disruptions.”