by Vincent Muthee
The U.S Federal Reserve issued its third interest rate cut of the year yesterday. However, the move has resulted in concerns rather than providing a boost for crypto such as Bitcoin (BTC).
Investors waited for a clear signal that cheaper rates would ease pressure on the economy but instead, it has widened the debate around whether the rate cut points to deeper trouble ahead. As a result, Bitcoin has remained constrained over the last 24 hours as investors fear for incoming liquidity stress and recession risks.
Fed’s Third Rate Cut Raises Fresh Concerns
The Fed delivered another 25 bps rate cut after similar adjustments in September and October. Chair Jerome Powell noted that economic activity still posts moderate growth, but the committee pointed to steady cooling in the labor market. Hiring has also slowed again, unemployment has ticked higher, while early signs of wage pressure ease across several industries.
However, inflation has moved slightly upward from early-year readings, which complicated the Fed’s balancing act. Policymakers want progress toward the 2% target while keeping the recovery intact.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months,” the press release read.
Fed’s dot plot, however, has added more tension to the outlook. The projection shows only one potential cut in 2026, while seven out of nineteen officials expect no further cuts next year. This split reveals how differently committee members interpret the current slowdown.
Bitcoin Struggles Despite Expected Boost From Cheaper Rates
Bitcoin slipped below $90,000 shortly after the Fed announcement. Earlier, traders expected a bounce toward $100,000 as the price stabilized above $92,000. But the sudden drop to $89,400 surprised many market desks.
As of this writing, Bitcoin has recovered slightly, trading at $90,260 per the daily chart. However, the price is still on red with a 2.6% decline over the last 24 hours.
Bitcoin’s market sentiment has shifted as ETF inflows cool down. While issuers still attract capital, inflows are offsetting routine selling instead of driving a rally.
Why is Bitcoin Falling?
Bitcoin’s weakness stems from shrinking liquidity across the broader market. Stablecoin inflows flattened over the past week, leaving fewer fresh dollars to absorb normal selling. This gap has allowed small moves to trigger sharper swings.
Investors also pulled risk exposure after Powell’s cautious tone during yesterday’s FOMC remarks. Rate cuts once fueled risk appetite, but the current cycle signals economic strain with traders now treating each cut as evidence that the Fed sees deeper problems forming in the real economy.
Economist Claudia Sahm issued a pointed assessment of this, highlighting that investors should not celebrate deeper cuts as rapid easing rarely accompanies a strong economy.
“If the Powell Fed ends up doing a lot more cuts….then we probably don’t have a good economy. Be careful what you wish for,” Sahm remarked, as per a recent Fortune report.
Her views also align with concerns shared by Henrik Zeberg, Head Macro Economist at Swissblock. His model flagged a slowdown since November 2024, and he believes consumer strain now drives the downturn.
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