Bitcoin News Today: Crypto's Paradox: Fed Easing Fuels Fear, Not Frenzy

The U.S. Federal Reserve's 25 basis point rate cut on October 29 has sent mixed signals through global markets, with cryptocurrency traders grappling with a paradox: lower borrowing costs typically favor risk assets, yet Bitcoin and Ethereum initially fell following the decision. The central bank reduced its benchmark interest rate to a target range of 3.75%-4.00%, the first easing since 2023, amid a government shutdown that has left policymakers operating with incomplete economic data, Reuters reported. While the move aims to bolster a labor market showing signs of softness, crypto markets reacted cautiously, with Bitcoin dipping to $111,000 and Ethereum dropping to $4,000, reflecting lingering concerns over inflation and geopolitical uncertainties, Coinotag reported.

The Fed's decision, widely anticipated by traders, was accompanied by the announcement that quantitative tightening (QT) will end by December 1, Coinotag reported. This shift is expected to inject liquidity into financial markets, historically a tailwind for cryptocurrencies. Analysts at the Bank for International Settlements noted that Bitcoin has averaged annual returns exceeding 200% during past easing cycles, such as those from 2017 to 2021. However, immediate crypto gains were muted. CoinGlass data showed 24-hour liquidations jumped 75% to $557 million, with over 146,000 investors seeing positions wiped out, compounding the market's fragility, Crypto.news reported.

The Fed's pivot to easing was driven by a dual mandate dilemma: while inflation remains above the 2% target at 3%, labor market indicators—including a 4.3% unemployment rate in September—have prompted officials to prioritize growth, according to Coinotag. Fed Chair Jerome Powell emphasized in a post-meeting statement that the central bank is "monitoring inflation risks" but acknowledged the need to support employment. This balancing act has left investors in a holding pattern. The Crypto Fear and Greed Index fell to 39, indicating a "fear"-driven market, as traders await clarity on whether the rate cut marks the start of a broader easing cycle.

Whale activity, however, suggests optimism. One large investor deposited $48 million in leveraged Bitcoin and Ethereum positions ahead of the FOMC meeting, signaling confidence in a potential post-cut rally, Coinotag reported. Michael van de Poppe, a crypto market expert, argued that Bitcoin's recent breakout above $112,000 validates the bull market's resilience, with further gains possible if the Fed signals additional easing. Yet, this optimism clashes with short-term realities. The government shutdown has delayed key economic data, including the October jobs report, forcing the Fed to rely on incomplete information, Reuters noted. Former Fed official Loretta Mester warned that policymakers risk "losing sight of the inflation part of the mandate" while focusing on employment, as reported in The Manila Times.

Looking ahead, the December meeting remains a wildcard. While markets currently price in another 25 bps cut, CNBC noted, Fed officials have left the door open for a pause, depending on how labor and inflation trends evolve. Bank of America economists added that Powell is unlikely to commit to a December move, given the data vacuum. For now, crypto markets are in limbo—benefiting from improved liquidity but constrained by macroeconomic uncertainties. As one trader put it, "We're buying the cut but selling the uncertainty."'