Fed’s Hawkish Pivot: Powell’s Rate Cut Pause Sends Crypto Markets Tumbling
Markets reel as Fed chair signals December rate cuts are off the table—digital assets take the hardest hit.
The Domino Effect
Bitcoin shed 5% in hours while Ethereum dropped 7% following Powell's unexpected hawkish turn. Altcoins bled even deeper, with major tokens seeing double-digit percentage declines as traders scrambled to reposition.
Traders who bet on continued monetary easing got caught flat-footed—another reminder that crypto markets still dance to the Fed's tune despite all the decentralization talk.
Risk assets everywhere felt the sting, but crypto's amplified moves showed who's really wearing the volatility crown. The 'digital gold' narrative gets tested every time traditional finance flexes its muscles.
So much for that December Santa rally—Wall Street's favorite game of 'will they or won't they' just got a lot more expensive for crypto bulls.
TLDR
- Fed cuts rates by 25 bps but says a December cut is not guaranteed.
- Bitcoin fell 1.49% and Ethereum dropped 1.07% after Powell’s remarks.
- Fed ends balance sheet runoff starting December 1 for liquidity reasons.
- Powell says inflation is still elevated and labor market is weakening.
The crypto market fell sharply after Federal Reserve Chair Jerome Powell said a rate cut in December is “far from certain.” His comments followed the Fed’s latest policy meeting, where it lowered interest rates by 25 basis points but offered no clear path forward. Bitcoin and Ethereum dropped quickly, reversing earlier gains. Traders reacted to Powell’s cautious tone, which shifted expectations for continued easing this year.
Fed Cuts Rates Again, but Signals a Pause Ahead
The Federal Reserve lowered its benchmark interest rate by 25 basis points on Tuesday bringing the target range to 3.75%–4.00%. This was the second consecutive monthly cut. The MOVE was expected, but the market was watching for guidance on future policy.
Speaking after the decision, Powell stated that a rate cut at the next meeting in December is “not a foregone conclusion.” He added, “Far from it.” This statement reduced expectations of further easing, which had been widely priced in by investors.
The Fed also confirmed that its balance sheet runoff will end on December 1. Powell explained that liquidity levels in the system were adequate, and the decision was made to keep short-term funding markets stable. The announcement marks the end of the Fed’s quantitative tightening campaign that began over a year ago.
Crypto Prices Drop After Powell’s Remarks
The crypto market reacted quickly to the Fed’s statements. Bitcoin dropped 1.49% to $111,237, while ethereum fell 1.07% to $3,937. Both assets declined immediately after Powell’s press conference, erasing gains made earlier in the session.
Traders interpreted the Fed’s comments as a shift away from the dovish outlook. Powell’s words suggested that further cuts may not come unless economic data changes meaningfully. This reduced investor appetite for risk assets such as cryptocurrencies.
Ethereum fell below $3,910, its lowest point of the day, according to TradingView. The move mirrored broader financial markets, where stocks declined and U.S. Treasury yields rose. The U.S. dollar also strengthened, adding more pressure to crypto valuations.
Fed Maintains Uncertainty to Manage Market Expectations
Powell’s press conference emphasized caution and data dependence. He said, “We are not on a preset course,” and noted that officials have “strongly different views” on future rate moves. The decision not to commit to December’s outlook was seen by markets as a way to keep flexibility.
Analysts noted that Powell’s language was measured and avoided firm commitments. While the Fed acknowledged some softening in the labor market, it also pointed to persistent inflation. Powell stated that “inflation remains somewhat elevated,” making it harder to justify another immediate cut.
This approach reflects the Fed’s aim to avoid locking itself into a policy path. By not providing forward guidance, it allows room to adjust based on upcoming economic data. As a result, uncertainty has increased, affecting market sentiment.
Credit Market Moves Reflect Growing Concerns
While equities and crypto saw quick moves, the credit market is also showing signs of strain. Oracle’s five-year credit default swaps (CDS) ROSE to 83 basis points, the highest since 2023. This shows rising costs to insure against corporate debt default.
Analysts have raised concerns about high levels of corporate borrowing, especially in sectors tied to AI infrastructure. Oracle’s debt is expected to grow as it funds large-scale projects. Rising CDS levels suggest that investors are beginning to reprice risk in credit markets.
The broader trend in credit may signal caution beyond crypto. As Powell indicated the Fed’s support is not guaranteed, risk-sensitive areas such as high-growth tech and crypto may continue to face volatility.
