Bitcoin Slumps to $109K Despite Fed Rate Cut and End of QT: What’s Behind the Unexpected Drop?
Bitcoin experienced a sharp decline to $109,200 following the U.S. Federal Reserve’s announcement of a 0.25% interest rate cut and the decision to halt quantitative tightening. The move puzzled many investors, especially since such monetary policy easing is typically seen as favorable for risk assets like cryptocurrencies. Yet, instead of rallying, Bitcoin shed nearly 6% from its earlier high of $116,400 earlier in the week, leaving traders questioning the underlying forces behind the decline.
The Federal Reserve’s widely anticipated rate cut was already priced in by markets, with consensus across analysts forecasting the 25 basis point reduction. However, the market reaction suggests that investors were more focused on larger macroeconomic uncertainties rather than the rate cut itself. The Fed also confirmed it would stop reducing its balance sheet starting December 1, effectively ending the quantitative tightening (QT) phase — a move intended to inject more liquidity into the financial system.
Despite these seemingly bullish developments, Bitcoin’s sell-off accelerated. Analysts point to a broader shift in market sentiment, where traders are no longer solely reacting to central bank moves but are instead weighing long-term economic indicators, including rising job layoffs, sticky inflation, and geopolitical risks. These elements are creating a more cautious atmosphere, leading to risk aversion even in the face of supportive monetary policy.
Another contributing factor is the speculation surrounding the sustainability of the artificial intelligence boom. Some market participants fear that AI-related investments might be inflating a bubble, similar to the dot-com era, which could have ripple effects across tech and digital asset markets. This uncertainty is feeding into the overall cautious sentiment, dragging down Bitcoin along with other risk assets.
Adding to the complexity is the Federal Reserve’s “dot plot,” a projection tool that now indicates three more rate cuts in 2025. Some institutions, including Goldman Sachs, foresee additional cuts in early 2026, potentially bringing the federal funds rate down to between 3% and 3.25%. While this long-term easing outlook would typically be a tailwind for Bitcoin, the current market psychology seems to be more focused on the immediate economic threats rather than potential future benefits.
Traders are also preparing for further guidance from Federal Reserve Chair Jerome Powell. His remarks during the upcoming Federal Open Market Committee (FOMC) press conference are expected to provide more clarity on the central bank’s outlook. However, many believe that his commentary will be closely scrutinized for insights into the Fed’s views on inflation persistence, employment trends, and the potential for a “soft landing” of the U.S. economy.
Moreover, the recent behavior of Bitcoin suggests that the market might be undergoing a broader correction after a prolonged rally. Technical indicators show overbought conditions had developed earlier in the week, which may have set the stage for a pullback regardless of the Fed’s decision. This correction could also be part of a larger consolidation phase, as investors await stronger catalysts or clearer economic signals.
From a structural perspective, the crypto market remains sensitive to changes in global liquidity. While the end of QT should, in theory, increase capital availability, the current global economic climate — marked by uncertainty in China’s growth, ongoing geopolitical tensions, and mixed data from major economies — may be muting the positive effects of such policy shifts. In other words, macro headwinds are overshadowing monetary easing.
Additionally, institutional investors may be taking profits after Bitcoin’s recent rally, reallocating capital to more defensive positions as volatility picks up. The broader equity markets have also shown signs of weakness, which tends to spill over into the crypto space. This rotation out of risk assets could be contributing to Bitcoin’s short-term decline.
Looking ahead, Bitcoin’s price trajectory will likely depend on several interrelated factors: the Fed’s tone in upcoming meetings, evolving inflation data, global geopolitical developments, and the strength of the U.S. labor market. If economic indicators worsen, the Fed may accelerate its rate cuts, potentially providing renewed support for Bitcoin. However, if uncertainty persists or worsens, investors may continue to shun high-volatility assets in favor of safer havens.
In the near term, traders will be watching key technical levels closely. A sustained break below $109,000 could open the door to further downside, while a rebound above $112,000 might signal stabilization. Market participants are also eyeing volume trends and on-chain metrics to assess whether this dip represents a temporary correction or the start of a more significant downtrend.
Ultimately, while the Fed’s pivot toward easing is generally a positive for Bitcoin, the market appears to be signaling that interest rate policy alone is no longer sufficient to drive bullish momentum. In an environment dominated by complex macroeconomic narratives, trader psychology and broader financial conditions are playing an increasingly pivotal role in shaping price action.