Bitcoin collapses after false hope of rebound

As macroeconomic uncertainties weigh on this end of the year, every move by the Federal Reserve is closely scrutinized. Last Wednesday, the Fed cut rates for the third time in a row, sparking an immediate reaction in the crypto market. Bitcoin surged above $93,000, driven by renewed risk appetite. This unexpected rebound, against a backdrop of more flexible monetary policy, raises as many expectations as doubts.

A crypto rebound aligned with the mechanics of the Fed

The Fed confirmed on Wednesday a third rate cut in three months, bringing the cumulative reductions to 0.75% since September.

This decision, although anticipated, immediately caused a reaction in the crypto market. Bitcoin rose from below $90,000 to a peak of $93,500 on Coinbase, before retreating slightly to $92,300.

According to Santiment's analysis, this dynamic fits into a well-known pattern. “Each rate cut has led to short-term selling, following the classic pattern of buy on the rumor, sell on the news”indicates the on-chain firm.

However, this behavior is only temporary. Santiment specifies: “there is usually a rebound once the dust settles”adding that this stabilization phase “can provide predictable trading opportunities”.

This phenomenon is part of a global economic logic, regularly observed after decisions by the Fed. Here are the key elements highlighted by analysts:

• Rate cuts encourage an increased appetite for risk, due to lower financing costs;

• Investors seek higher returns, which pushes them towards speculative assets like cryptos;

• Each rate cut was followed by a short-term decline, then a more moderate but predictable rebound, according to historical data analyzed by Santiment;

• Bitcoin's upward movement still remains fragile, but could enter a consolidation cycle if market sentiment stabilizes in the coming days.

Optimism questioned as bitcoin falls back below $90,000

While some observers were hoping for a lasting rebound after the Fed's rate cut, the markets were abruptly reminded of their volatility.

This Friday, bitcoin fell back below $90,000, completely erasing the gains made after Wednesday's announcement. This relapse temporarily invalidates the bullish scenario anticipated by certain traders and revives doubts about the solidity of market sentiment.

Like the emphasized Jeff Ko, chief analyst at CoinEx, the rate cut was “widely anticipated and already included in the prices”. It is therefore the more subtle signals from the Fed, and in particular its dot plot, which have attracted attention. He has “leaning slightly in favor of monetary tightening”according to Ko, which probably cooled the bullish enthusiasm of investors.

Furthermore, the $40 billion in purchases of short-term Treasury bonds announced by the Fed were interpreted as a technical measure and not as real monetary support. Jeff Ko insists: this is not a massive recovery plan, but “a technical maneuver intended to inject short-term liquidity, to adjust short-term rates”.

Despite everything, part of the market saw it as a positive signal, which supported American stocks in the short term… and briefly bitcoin. The drop below $90,000 shows that this perceived support was more fragile than it appeared.

In this more uncertain context, Jurrien Timmer, director of global macroeconomic strategy at Fidelity Investments, calls for taking a step back. He acknowledges that bitcoin has underperformed stocks this year, but observes a more reassuring underlying dynamic: “the network structure is stabilizing and the market is becoming more mature than in previous cycles”.

If the Fed's signals maintain hopes of monetary support, the market reaction highlights a more nuanced reality. The price of bitcoin, subject to contradictory forces, oscillates between speculative revival and structural uncertainty, reflecting a market still in search of lasting benchmarks.