Bitcoin’s response to Federal Reserve meetings has become painfully predictable this year. Every single FOMC announcement has sent the crypto plunging. The pattern is now so consistent that traders set their calendars around it.
The Fed cut rates by 25 basis points on December 10, bringing the range down to 3.5%-3.75%. It was the third cut of 2024. Bitcoin jumped briefly to $94,498, then crashed within hours. Over $56 million in long positions got liquidated, according to CoinGlass data.
This isn’t random. There’s a mechanical reason why Bitcoin FOMC reactions keep turning negative.
The Real Reason Behind Bitcoin’s FOMC Sell-offs
Crypto analyst CryptoMichNL broke down what’s actually happening. The Fed is shifting from tight 2021-style liquidity to more accommodative 2025 settings. But here’s the thing. These changes take weeks to flow through markets.
When the FOMC makes an announcement, high-frequency traders jump in first. They buy the immediate reaction. Retail traders pile in next, thinking rates just dropped, so Bitcoin must go up. That creates a brief spike.
Then reality hits. The actual liquidity won’t arrive for weeks. Professional traders know this. They sell into the retail excitement, taking quick profits. The result? A sharp drop that wipes out overleveraged long positions.
“These moves are primarily aimed at flushing out longs through high liquidations,” CryptoMichNL explained in his analysis. The pattern has repeated at every 2025 FOMC meeting so far.
Also Read: Why is Crypto Market Crashing After Fed’s Rate Cut?
How Monetary Policy Actually Moves Bitcoin
The connection between Bitcoin and Fed policy isn’t new. But it’s gotten much stronger. Bitcoin’s correlation with the Nasdaq 100 hit historic highs above 0.8, meaning they moved almost identically.
Why does this matter? Bitcoin now trades like a tech stock, not digital gold. When the Fed signals tighter policy ahead, investors dump risk assets. Bitcoin gets hit first and hardest.
Volatility typically runs 50-100% higher on FOMC decision days compared to normal trading. The initial announcement triggers algorithmic selling within milliseconds. Then Jerome Powell’s press conference creates a second wave of volatility.
Powell’s tone matters more than the actual rate decision. His December 10 press conference leaned hawkish despite the rate cut. He emphasized inflation risks and warned against expecting rapid easing. Markets heard “fewer cuts in 2026” and sold off immediately.
What Technical Levels Matter Right Now
Bitcoin is stuck in a choppy range. The $86,000 level is critical support. Breaking below that opens the door to $80,000, according to multiple technical analysts.
On the upside, $92,000 is the resistance to watch. A clean break above that zone could push Bitcoin toward $100,000. Analyst Michaël van de Poppe called the recent bounce “a great move” and suggested $91,500-$92,000 as key support.
Trader Daan Crypto Trades pointed out something interesting. Bitcoin bounced right off the 0.382 Fibonacci retracement level from the entire cycle. That’s the lowest it could go without breaking the overall market structure.
The choppy price action isn’t random either. It’s driven by thin liquidity and illiquid order books. Small trades create outsized moves in both directions.
What’s Coming in 2026
CryptoMichNL expects the real directional move in the next 1-2 weeks. That timing would give clarity heading into 2026. The bullish thesis hasn’t changed. Bitcoin continues forming higher lows, which signals that an upward structure is building.
Q1 2026 looks critical for Bitcoin’s cycle direction. A lot of the 4-year cycle selling should diminish by then. If Bitcoin holds above $86,000 and breaks $92,000, the path to $100,000 reopens.
The Fed’s current stance complicates things. Markets are pricing a 78% chance that rates stay unchanged until March 2026. That’s two months of waiting for the next potential cut.
But there’s a twist. The Fed announced $40 billion in Treasury bill purchases starting December 12. It’s not full quantitative easing, but it does inject liquidity into the system. That could cushion some of the hawkish impact from Powell’s tone.
Also Read: Bitcoin Gains Momentum, Eyes $100,000 Ahead of FOMC Meeting
Why Bitcoin Keeps Dropping Despite Rate Cuts
Here’s what confuses people. The Fed is cutting rates. Lower rates should help Bitcoin. So why does it keep dropping?
The answer is expectations versus reality. Markets price in rate cuts months ahead of time. By the time the FOMC announces a cut, it’s already baked into prices. There’s no room for sustained upside.
Bitcoin surged immediately after the rate cut, but the rally quickly faded as investors digested Powell’s hawkish tone. The initial 2.6% spike within an hour got completely erased.
This is classic “buy the rumor, sell the news” behavior. Except it’s amplified in crypto because leverage is so high. When prices spike, overleveraged longs get liquidated on the way down. That creates a cascading effect.
How Institutional Money Changed Bitcoin’s Behavior
Bitcoin used to ignore traditional finance. Not anymore. The approval of spot Bitcoin ETFs changed everything. ETF inflows have helped boost Bitcoin’s price, and the prospect of lower rates has pushed prices higher.
But that institutional involvement comes with a catch. Bitcoin now responds to the same macro forces that drive stocks and bonds. Hedge funds adjust crypto exposure based on Fed policy, not just crypto fundamentals.
When real yields rise, Bitcoin falls. When the dollar strengthens, Bitcoin weakens. These correlations didn’t exist five years ago. Now they dominate short-term price action.
What Traders Should Watch Next
The next FOMC meeting isn’t until late January 2026. That gives Bitcoin room to move without Fed interference. CryptoMichNL believes the heavy correction was “highly manipulated and not organic.”
Key levels to watch:
- Support: $86,000 (must hold)
- Resistance: $92,000 (must break)
- Target: $100,000 (if resistance breaks)
The structure remains bullish as long as Bitcoin keeps making higher lows. But any break below $86,000 invalidates that setup and opens up much lower prices.
Powell’s comments about future policy will matter more than individual rate decisions. If he signals the Fed is done cutting, Bitcoin could struggle. If he leaves the door open for more easing, the rally could resume.
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Disclaimer:
Look, we’re just journalists reporting the news here, not your financial advisors. Everything you read above is for information purposes only. Crypto is wild, unpredictable, and can absolutely wreck your savings if you’re not careful. Never invest money you can’t afford to lose. Seriously, we mean it. Do your own research, talk to actual licensed financial professionals, and remember that past performance means absolutely nothing when it comes to future results. The crypto market can turn on a dime, and what’s hot today might be toast tomorrow. We’re not responsible for your investment decisions, good or bad. Trade smart, stay safe, and don’t bet the farm on anything you read on the internet, including this article.
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