Why is crypto crashing today after the Fed rate cut? Oct. 29
The crypto market is crashing today, with Bitcoin price falling to $111,000, down from this week’s high of $116,500, and the valuation of all tokens falling to $3.76 trillion.
- The crypto market crashed after the Federal Reserve rate cut.
- Most coins dropped as liquidations jumped by 75% to $557m.
- The crash also happened as open interest dropped $164 million.
Most cryptocurrencies were in the red, with tokens like Aster, Story, Cronos, and Conflux being the top laggards after falling by over 5%.
Crypto is crashing after the Fed decision
The crypto market crashed as traders sold the Federal Reserve interest rate cut. In a statement, officials, led by Jerome Powell, slashed interest rates by 0.25% as most analysts were expecting.
This interest rate cut brought the official cash rate to between 3.75% and 4%, the lowest level since 2022 when the bank was hiking rates as inflation jumped.
Cryptocurrency prices do well when the Federal Reserve is cutting interest rates as this normally stimulates a risk-on sentiment among market participants.
Therefore, the crypto market is crashing today as investors sell the news as the rate cut was in line with expectations. This is a situation known as buying the rumor and selling the news.
Investors are also selling the Donald Trump and Xi Jinping meeting at the APEC Summit. The two leaders are expected to sign a trade deal that de-escalates the current crisis. Indeed, China has already started buying US soybeans in a major political victory for Trump.
Soaring crypto liquidations
The other main reason why the crypto market is going down today is that liquidations jumped on Wednesday.
Data compiled by CoinGlass shows that the 24-hour liquidations jumped by 75% to $554 million. Over 146,000 crypto investors were liquidated in the past 24 hours, with Ethereum (ETH) and Bitcoin (BTC) accounting for a big share.
This liquidation sent memories of the $20 billion wipeout that happened earlier this month. Over 1.6 million traders were wiped out.
The rising liquidations coincided with the ongoing deleveraging among investors. Data shows that the futures open interest has dropped to $164 billion, down from $228 billion earlier this month.
More data shows that more traders in top exchanges have turned bearish, with longs being 49% and shorts being 51%.
