A crypto market crash happened on Thursday, Dec. 11, a day after the Federal Reserve delivered its interest rate decision, which was largely in line with analysts’ expectations. Bitcoin pulled back below $90,000, while the market capitalization of all coins dropped to nearly 3% to $3 trillion.
Crypto Market Crash Happens Despite Rate Cut and QE
The crypto market is down a day after the Federal Reserve delivered a 0.25% rate cut, which was in line with what most analysts expected. Before the rate decision, polls by Kalshi and Polymarket showed a 97% probability of a cut.
The rate cut went much further than analysts expected, as the bank decided to start quantitative easing (QE) a few weeks after ending quantitative tightening (QT).
In this QE, the bank will buy back short-term government bonds worth about $40 billion a month, a move that will increase the money supply in the economy. This explains why the US dollar index plummeted after the rate decision.
The other key part of the Fed decision was the dot plot, which showed that officials will cut interest rates once in 2026 and again in 2027.
However, their dot plot is not reliable as it did not include the views of the incoming Federal Reserve chair, as Jerome Powell’s term ends mid next year. Trump plans to announce his nomination to the Fed earlier next year, a move that will create a shadow official whom the market will listen to more than to outgoing Powell.
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Why Crypto Prices Are Going Down After the Fed Decision
Bitcoin and the broader crypto market are going down after the Fed decided for several reasons. First, there is a situation known as buying the rumors and selling the news. In this case, Bitcoin and most altcoins were in the green ahead of the Fed decision, with Bitcoin reaching a high of $94,700. It is normal for assets to retreat after a major event as traders sell the news.
Second, the crypto market crash is also occurring as the Bitcoin price formed risky patterns before the Fed decision. It formed a death cross, a bearish flag, and remained below the 50-day and 100-day Exponential Moving Averages. It was also below the Supertrend indicator, which is a bearish sign.
Additionally, market participants remain fearful, with the Crypto Fear and Greed Index moving into the fear zone of 29, much higher than this month’s low of 8. The crypto industry is highly volatile when the Fear and Greed Index is in the fear zone.
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