Fed's Hawkish Tone Sparks Bitcoin Sell-Off, Testing $100K Support Amid Mixed Market Signals

The U.S. Federal Reserve’s 25-basis-point rate cut on September 17, 2025, triggered a sharp sell-off in Bitcoin, with the price plummeting 4.6% to $101,300 in the immediate aftermath. The decision, coupled with a revised 2025 inflation forecast of 2.5% and a reduced rate-cut outlook of just two additional cuts, sent ripples through the crypto market. Ether (ETH) fell 5.96% to $3,600, while broader market corrections followed. Analysts attributed the decline to the Fed’s hawkish tone, which signaled a cautious approach to easing despite the rate reductiontitle2^[2].

Bitcoin’s price action revealed mixed signals. While short-term positioning saw longs being stopped out and shorts closing in profit, on-chain data indicated accumulation by large holders. Wallets holding between 10 and 10,000 BTC added 56,372 coins since late August, suggesting institutional confidence in the asset’s long-term trajectorytitle6^[6]. Meanwhile, retail investors exhibited a surge in “buy the dip” sentiment, though crypto analytics firm Santiment warned that such optimism often precedes further downside. Historical patterns suggest markets typically bottom only after retail buyers abandon hope, a scenario not yet materializedtitle6^[6].

The Fed’s policy shift also influenced broader capital flows. Bitcoin ETFs continued to attract inflows, with cumulative assets under management reaching $57 billion since inception. BlackRock’s IBIT alone holds $87 billion, reflecting institutional demandtitle3^[3]. However, JPMorgan’s David Kelly highlighted risks of a “sell-the-news” event, where pre-announcement bullishness reverses after the decision. Additionally, the market’s forward curve suggested rate cuts were largely priced in, raising concerns about diminished catalysts for further gainstitle3^[3].

Technical analysis underscored Bitcoin’s precarious positioning. The price tested critical support levels around $100,000–$101,400, with a failure to reclaim this zone potentially leading to a deeper correction. Chart patterns, including a bearish divergence in the MACD and RSI, and a rising wedge on the weekly chart, reinforced the likelihood of a pullback to $100,000. Conversely, a sustained rebound above $117,900 could reignite bullish momentum toward all-time highstitle5^[5].

Market participants remained split on the outlook. While the Fed’s easing cycle historically benefits risk assets, including Bitcoin, the current environment posed unique challenges. A weaker U.S. dollar, typically supportive of crypto, was tempered by geopolitical uncertainties and inflationary pressures from Trump-era tariffs. Santiment noted that Bitcoin’s 30-day MVRV ratio had turned negative, indicating recent buyers were underwater—a condition historically favorable for accumulationtitle6^[6]. However, experts cautioned against overconfidence, emphasizing that a “healthy reset” after the September selloff did not negate the risk of deeper lows before a sustainable recovery could take holdtitle7^[7].