Fed Rate Cut Fails to Lift Bitcoin Amid Uncertain Monetary Policy Landscape

The U.S. Federal Reserve recently reduced its benchmark interest rate by 25 basis points, setting the new target range at 4.00–4.25%. This marks the first rate cut since December of last year. Despite heightened anticipation surrounding the announcement, Bitcoin (BTC) prices dipped slightly in a "buy the rumor, sell the news" scenario typical of financial markets. Analysts note that the rate cut was widely expected by investors, shifting attention to the Fed's future monetary policy direction and the likelihood of additional cuts.

As of 8 a.m. on September 18, Bitcoin was trading at KRW 161.48 million on South Korea's Upbit exchange, reflecting a 0.42% decline from the previous day. Similarly, BTC saw a minor drop of 0.01%, trading at $11,685.2 on Binance. However, it was a mixed bag for other digital assets. The CoinDesk 20 Index, which tracks the performance of leading altcoins excluding Bitcoin, rose 0.70%. Ethereum (ETH) posted a gain of 1.57% to $4,571, while XRP (XRP) climbed 1.63% to $3.09, demonstrating resilience among some altcoins.

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Bearish Sentiment Prevails As Liquidations Surge

Data analytics platform Coinglass reported a total of $49.84 million in Bitcoin positions liquidated within the past 24 hours. Notably, 69.3% of liquidations were on long positions, reflecting bearish market sentiment. Across the broader cryptocurrency landscape, total liquidations reached $311.05 million, signaling broader volatility in response to macroeconomic dynamics.

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Fed's Rate Cut Signals Slowing Economy and Political Pressure

The Federal Reserve justified the 25-basis-point rate cut as a "risk management" move to counter softening labor market conditions and sluggish economic growth. August's jobs report revealed that the U.S. added only 22,000 new jobs, while the unemployment rate rose to 4.3%. During a post-meeting press conference, Fed Chair Jerome Powell acknowledged the economic slowdown and labor market deterioration, attributing these shifts partly to structural changes, such as evolving immigration trends.

Political considerations also played a significant role in the Fed's decision-making process. Former President Donald Trump had publicly criticized the central bank for holding rates steady while advocating aggressively for rate cuts. Trump's push to overhaul the Federal Reserve's Board of Governors intensified discussions around safeguarding the Fed's autonomy.

Chris Line, head of Galaxy Liquid Active Strategies, commented, "The Federal Reserve is navigating increasing pressure to adopt a dovish policy stance. If Chair Powell is replaced, his successor could favor more significant and rapid cuts, potentially influenced by political agendas."

Powell responded to these implications firmly, stating, "The Federal Reserve remains deeply committed to preserving its independence amid external pressures."

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Tepid Market Reaction and Fed Dot Plot Projections

Despite the significance of the rate cut, financial markets responded with muted enthusiasm. Bitcoin briefly rallied by 1% following the announcement but retraced its gains shortly thereafter. Similarly, U.S. equity markets and gold prices experienced brief upward movements before reversing to weaker levels.

The Fed’s updated dot plot garnered attention from market participants, reflecting individual Federal Open Market Committee (FOMC) member projections on future rate adjustments. The latest dot plot suggests that multiple Fed officials anticipate two additional rate cuts before the end of the year—a forecast that could have broader implications for risk assets like Bitcoin.

Matt Mena, digital asset strategist at 21Shares, remarked, "The dot plot signaling potential further easing is more consequential for Bitcoin than the 25-basis-point cut itself. If additional cuts materialize this year, BTC could be positioned to challenge new highs."

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Investor Sentiment Reflects Uncertainty

The Fear & Greed Index, a widely regarded measure of sentiment in the cryptocurrency market, registered a neutral score of 53 in its latest reading, slightly down from the prior day's score of 52. Neutral territory on the index suggests waning enthusiasm and growing uncertainty, with lower scores indicating potential selling pressure.

Market participants are now closely analyzing the implications of the Fed's decision and its potential ripple effect across digital assets. As macroeconomic factors increasingly intersect with cryptocurrency performance, monetary policy remains a pivotal driver shaping the trajectory of Bitcoin and the broader market.

Concluding with restrained optimism, the focus turns to whether any further dovish actions by the Federal Reserve could reignite bullish momentum in cryptocurrencies or amplify existing headwinds in a sector defined by volatility and economic interdependence.