Why did Bitcoin fall today? Powell's "one sentence" triggered a crypto assets dumping wave.

Federal Reserve Chairman Powell stated that a rate cut in December is “far from certain.” As a result, the crypto assets market experienced a significant fall. The reason for Bitcoin's decline today has become the focal point of the market, with BTC's price falling by 1.97% to $110,429. The Federal Reserve announced a rate cut of 25 basis points, but Powell warned that officials have “diametrically opposed views” on whether a rate cut should take place again in December, which could be the last rate cut of the year.

Powell 'far from certain' triggers market panic

After the Federal Open Market Committee (FOMC) meeting in October, Powell acknowledged that the U.S. labor market is weakening, while the inflation rate remains “slightly elevated.” He added that despite some signs of weakness previously, recent data indicate that the overall economic outlook has not changed significantly. This ambiguous statement brought uncertainty to the market, and his subsequent comments about a rate cut in December directly triggered a sell-off.

Powell stated, “Further interest rate cuts at the December meeting are not a done deal, far from it.” This statement became the direct catalyst for why Bitcoin fell today. The market had generally expected the Federal Reserve to cut interest rates again before the end of the year in response to the pressures of slowing economic growth. However, Powell's remarks shattered those expectations, forcing traders to reassess their allocations in risk assets.

What further worries the market is that Powell revealed that Federal Reserve officials have “completely different views” on whether to cut interest rates again in December. This internal division indicates that the Federal Reserve is facing difficult policy choices. On one hand, a weak labor market requires supportive easing policies; on the other hand, persistent inflationary pressures limit the room for interest rate cuts. Powell warned that rising tariffs are putting pressure on prices, creating a challenging balancing act for the central bank.

The 25 basis point rate cut previously announced by The Federal Reserve (FED) now seems likely to be the last rate cut of the year. This rate cut aims to alleviate the situation of slowing economic growth and rising borrowing costs, but Powell's hawkish statements suggest that there is very limited room for further easing. This is a significant bearish signal for the crypto assets market, which relies on the liquidity environment.

The end of quantitative tightening but the pause in easing triggers dual signals

The Federal Reserve decided to end the asset balance sheet reduction plan starting December 1, indicating that reserves have reached a level consistent with ample liquidity. This should be good news, as the end of quantitative tightening means that the Federal Reserve will no longer withdraw liquidity from the market. However, the market's reaction to this was negative, due to the easing pause signal conveyed by Powell at the same time.

Powell stated that due to the recent rise in repurchase rates and financing costs, this step must be taken. His statement indicates that The Federal Reserve (FED) has ended its quantitative tightening policy but is unlikely to further lower interest rates. This “ending tightening but not further easing” neutral stance has left the market confused, as it is neither a clear hawkish nor dovish position, but rather a wait-and-see attitude.

Three Major Signals of the Federal Reserve's Policy Shift:

Decrease in interest rate: From 50 basis points in September to 25 basis points in October, indicating a slowdown in the easing pace.

December Rate Cut in Doubt: Powell clearly stated that it is “far from certain,” breaking market expectations.

End of Quantitative Tightening: Stopping the balance sheet reduction does not mean restarting quantitative easing, and the increase in liquidity is limited.

Regarding the question of why Bitcoin is falling today, the contradictory signals of the end of quantitative tightening and the pause in interest rate cuts are key factors. Crypto Assets investors have been hoping that the Federal Reserve's continued easing would inject liquidity into the market, pushing BTC to break historical highs. However, Powell's statements indicate that this expectation may be overly optimistic. The end of balance sheet reduction only stops the withdrawal of liquidity, and does not equate to actively injecting liquidity. Without further support from interest rate cuts, the upward momentum of the crypto market will clearly weaken.

Bitcoin and Ethereum are experiencing an immediate fall reflecting market sentiment

(Source: CoinMarketCap)

The market quickly reacted to these mixed signals. According to TradingView data, the price of Bitcoin fell by 1.97% to $110,429, while the price of Ethereum dropped by 1.07% to $3,937. After Powell's speech, the prices of both assets immediately declined, erasing previous gains. Ethereum experienced a significant intraday drop, even falling below $3,910 at one point, reflecting traders' reaction to Powell's signals that there would be no further rate cuts this year.

The technical analysis of why Bitcoin is falling today is equally important. The price level of $111,237 is close to the key psychological level of $110,000. If this support level is broken, it could trigger larger scale stop-losses and technical sell-offs. In terms of short-term trends, the drop caused by Powell's speech, although not severe, has broken the market's previous upward momentum, and the bullish structure in technical analysis may be threatened.

Traders interpreted Powell's statement as a warning that there would be no further interest rate cuts this year, which diminished the appeal of risk assets such as Crypto Assets. This fall corresponds with broader trends in the financial markets, with U.S. Treasury yields rising and the dollar strengthening. When Treasury yields rise, the attractiveness of fixed income assets increases, leading to capital flowing out of risk assets. A stronger dollar weakens the appeal of Bitcoin as a safe-haven asset, as investors are more inclined to hold dollars rather than Crypto Assets.

The Triple Pressure of Bitcoin's Fall:

Monetary Policy Uncertainty: The failure of interest rate cut expectations dampens risk appetite.

USD Strengthens: Weakens the demand for Bitcoin as an alternative store of value

Rising Bond Yields: Increased competitiveness of fixed income assets, diverting funds.

It is worth noting that as part of the repeated upward trend of Bitcoin following the Federal Reserve meeting, its price still has the potential to rise again. It may even hit a historic high before next month's Federal Reserve meeting. Historical data shows that Bitcoin often experiences short-term fluctuations after FOMC meetings, but subsequently resumes its upward trend. If the market digests Powell's hawkish remarks and shifts its focus back to the long-term value logic of crypto assets, BTC still has a chance to rebound.

Market Outlook: A Dual Test of Technical and Fundamental Aspects

The answer to why Bitcoin is falling today is already clear: Powell's hawkish statements have shattered the market's expectations for continued easing. But the more important question is whether this decline is a short-term adjustment or the beginning of a trend reversal. From a technical perspective, around $111,000 is a key support level, and holding above this level will provide a foundation for a subsequent rebound. If it breaks below, it may test the psychological level of $100,000.

From a fundamental perspective, the long-term logic of Bitcoin has not changed. Institutional adoption continues to advance, the inflow of funds into spot ETFs remains stable, and the application of blockchain technology is constantly expanding. Although the monetary policy of the Federal Reserve affects short-term fluctuations, it will not fundamentally change the value logic of crypto assets. The key is whether the market can maintain upward momentum based on its own fundamentals in the absence of further interest rate cut support.

For investors, the current fall may be an opportunity to buy on dips, or it could be a warning signal for a trend reversal. A prudent approach is to pay attention to the subsequent data, especially the actual decisions from the December FOMC meeting. If the Federal Reserve does indeed pause interest rate cuts, the crypto market may face a longer period of adjustment. However, if deteriorating economic data forces the Federal Reserve to restart easing, the logic for Bitcoin's rise will regain support.