The Federal Reserve (Fed) announced on Wednesday its third interest rate cut of the year by 25 basis points, in line with market expectations, adjusting the federal funds rate range to 3.5% to 3.75%. However, Chairman Jerome Powell released both dovish and hawkish signals during the post-meeting press conference, causing a rapid shift in market sentiment, leading to significant volatility in Bitcoin (BTC).
Powell expressed a cautious attitude towards easing policies
After the announcement, Bitcoin briefly surged to $94,400, but as Powell emphasized that inflation is still not truly under control and that the pace of future easing remains uncertain, short-term market sentiment weakened, and the price quickly fell back to around $90,000 at the time of writing, down about 2.2% in the past 24 hours.
Powell pointed out in his remarks that the current interest rate level has fallen into a reasonable neutral range, allowing the Fed to be more flexible in determining future policy adjustments. He emphasized that the most important thing at this stage is to observe changes in inflation and labor market data, rather than rushing to start a new round of easing. The internal differences are also quite evident, as this rate cut passed with a vote of 9 to 3, with two regional Federal Reserve Bank presidents opposing the rate cut, while Governor Stephen Miran advocated for a 50 basis point cut. The voting results reflect differing judgments within the committee regarding the strength of the U.S. economy, keeping the market cautious about the next policy path.
It is worth noting that the New York Fed announced on the same day that it would restart its short-term Treasury bill purchase program, planning to buy about $40 billion in short-term bills and securities with remaining maturities of less than three years over the next month. Although the Fed avoided describing this move as quantitative easing (QE), the market generally views it as a form of lightweight QE, symbolizing a loosening of the tightening cycle.
Under the current macro background, the volatility of Bitcoin has increased. The price fluctuates between $90,000 and $94,000, with multiple attempts to break through the upper edge but facing strong pressure from bears. Analysts point out that BTC must effectively break through the concentrated bear zone near $94,500 to escape the range-bound situation.
On-chain data shows structural pressure
On-chain data depicts another layer of structural pressure. Glassnode pointed out that Bitcoin has remained in the 'structurally weak zone' for several consecutive weeks, with prices trapped between the cost basis of short-term holders at $102,700 and the real market average at $81,300, causing unrealized losses in the market to gradually accumulate.
The proportion of unrealized losses over the past 30 days has risen to 4.4%, the highest level since the FTX collapse in 2022, while daily realized losses have reached $555 million. At the same time, long-term investors holding for more than a year are taking significant profits, with daily realized profits once exceeding $1.3 billion. Bulls find it difficult to establish effective support above these high-cost areas, making it hard for Bitcoin to recover the key resistance zone of $95,000 to $102,000.
Research from CryptoQuant further indicates that this round of rebound is mainly driven by spot buying rather than leverage funds entering the market. Since the correction in October, the open interest of Bitcoin perpetual futures has declined by more than 44%, indicating a continuous decrease in speculative positions. Although the spot-led rise is relatively healthy, if there is no return of leveraged positions, the market often struggles to maintain momentum.
In addition, CryptoQuant also alerted that if the policy signals released by the Fed in the future lean towards conservatism, the momentum driven by spot may be difficult to maintain. However, as long as BTC can effectively break through the resistance at $99,000 and $102,000, there is still a chance to push toward $112,000.
Overall, as long as the key resistance is not broken, Bitcoin may continue to fluctuate in the range of $90,000 to $94,000 in the short term. The market generally believes that what truly determines Bitcoin's direction is not just the rate cut itself, but the signals from the Fed regarding the policy pace for 2025, changes in inflation and employment data, and whether ETF capital can re-enter an accelerated phase.
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