Bitcoin News Today: Bitcoin Slumps Below $90K as Fed's Dovish Hesitation Dampens Crypto Rally

Bitcoin fell sharply on Wednesday, trading below $90,000, as the U.S. Federal Reserve delivered a 25-basis-point rate cut. The move, the third such easing this year, came with a cautious outlook that failed to rally crypto markets. Investors were left underwhelmed as the Fed signaled minimal rate cuts for 2026 and 2027, dampening expectations of aggressive monetary easing.

Ethereum and XRP followed Bitcoin's lead, with Ethereum falling below $3,200 and XRP struggling near the $2.00 level. The decline was marked by heavy long liquidations, totaling $440.2 million in the 12 hours following the Fed announcement. Long liquidations alone reached $334.8 million, indicating a strong shift in market sentiment.

Market analysts described the Fed's rate cut as a mixed signal for digital assets. While rate reductions typically support risk-on assets, the central bank's dovish tone was tempered by concerns over inflation. Fed Chair Jerome Powell emphasized a "wait-and-see" approach, noting downside risks in the labor market and inflationary pressures. This duality left investors uncertain about the future of monetary policy and crypto valuations.

How Markets Reacted

Bitcoin's price dropped nearly 3%, with Ethereum and other altcoins falling further. XRP dropped more than 4%, adding to the broad-based weakness. The market reaction suggested a lack of conviction among traders, as the initial rally after the rate cut failed to hold. Bitcoin briefly climbed above $94,000 before retreating, highlighting the fragility of the current price structure.

Exchange data also reflected the growing bearish sentiment. According to Coinglass, open interest in Bitcoin futures was significantly lower than peak levels in July, indicating reduced retail participation. This trend was echoed across Ethereum and XRP, where derivative positions showed weaker demand and thinner liquidity.

What Analysts Are Watching

Market observers are closely monitoring on-chain and liquidity metrics to assess the sustainability of the current price action. One indicator showing signs of easing pressure is the decline in exchange deposits by large holders. CryptoQuant reported that large players have reduced their transfers, from 47% in mid-November to 21% by the end of the week. This shift may suggest that major investors are less inclined to sell at these levels.

ETF flows, however, remain mixed. Bitcoin ETFs recorded $152 million in inflows on December 9, led by Fidelity's FBTC with $199 million. Ethereum ETFs saw $178 million in inflows, while XRP ETFs posted $50 million in inflows for the day according to market data. These figures contrast with recent outflows from some major ETFs, signaling a shift in institutional demand. Analysts are watching whether these inflows can stabilize the market and support a rebound above key resistance levels.

Risks to the Outlook

Despite the ETF inflows, risks remain on the downside. Oracle's weak earnings report and broader AI-related concerns have weighed on risk assets, including cryptocurrencies. The tech giant's disappointing outlook sent a ripple through equity markets, further dampening appetite for speculative bets. This environment, combined with a Fed that remains cautious about inflation, could prolong the consolidation phase for Bitcoin and other cryptos.

Technical indicators also show a bearish bias. Bitcoin is currently below key moving averages and the RSI is near 43, reflecting weak buying momentum. A break below $89,000 would test the next level of support. On the other hand, a sustained move above $93,000 could reignite bullish sentiment, but that would require strong institutional demand and a more dovish Fed according to market analysis.

What This Means for Investors

For investors, the next few weeks will be crucial in determining the direction of the market. A clearer Fed policy path, particularly around inflation expectations and the timeline for further easing, will be critical. ETF inflows provide some support, but they are not enough to drive a sustained rally without broader macroeconomic confidence.

Retail investors should remain cautious, given the elevated volatility and thin liquidity in many altcoins. The market's reaction to each Fed statement and data point will likely remain amplified. In the longer term, the structural shift toward institutional-grade crypto products and ETF participation could lay the foundation for more sustained price appreciation, but this may require a favorable macroeconomic backdrop according to financial experts.