Bitcoin and Ethereum Crash as Fed's Shocking Third Rate Cut Sends Markets Reeling - Are You Next?

The cryptocurrency market saw fluctuations on Wednesday following the Federal Reserve's decision to lower its benchmark interest rate by 0.25%. This move was coupled with the announcement that the Fed would resume purchasing Treasury bills, which has significant implications for both traditional and digital assets.

As a result of the Fed's decision, Bitcoin's value dipped to approximately $92,000, reflecting a decrease of 1.4% over the past day, according to data from the crypto price aggregator CoinGecko. In contrast, Ethereum experienced a slight increase of 0.6%, trading just above $3,300. Meanwhile, Solana saw a decline of 3.2%.

In the aftermath of the Federal Open Market Committee (FOMC) meeting, the Fed's statement suggested a cautious approach moving forward, indicating that it would "carefully assess incoming data, the evolving outlook, and the balance of risks." While some market participants hope for further cuts in interest rates, the FOMC did not provide a definitive signal for additional reductions in the coming year.

The FOMC also stated that it would initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves. “The Committee judges that reserve balances have declined to ample levels,” the FOMC said in its press release. Market expectations indicate a 22% chance that interest rates could be lowered again in January, according to the CME FedWatch Tool. Notably, Wednesday's decision was not unanimous; two members of the FOMC voted to keep rates unchanged.

Fabian Dori, the Chief Investment Officer at Sygnum Bank, remarked on the Fed’s stance, stating, “It’s not surprising that the U.S. central bank didn’t commit to lower borrowing costs in the months ahead, considering its concern regarding a softening labor market and still-sticky inflation.” The context for this cautious approach includes the delayed release of November’s consumer-price index report until December 18, and the unreleased hiring data from last month due to the government shutdown.

A recent ADP National Employment Report highlighted troubling trends, indicating that employers shed 32,000 jobs last month. It also noted that job creation has been flat for the second half of 2025, with November marking particularly weak performance in the manufacturing sector. With these economic indicators, the Fed faces a challenging balancing act: cutting interest rates too quickly could exacerbate inflationary pressures, while moving too slowly could prolong a downturn in the labor market, potentially leading to a recession.

Despite this uncertainty, the Fed’s latest cut was widely anticipated. Prior to the meeting, traders had assigned an 89% probability that the Fed would cut rates by a quarter of a percentage point for the third consecutive meeting. This decision also comes as President Donald Trump weighs the next chair of the U.S. Central Bank. National Economic Council Director Kevin Hassett is viewed as a frontrunner for the position, although interviews with candidates are just beginning.

Trump's frustration with current Fed Chair Jerome Powell has been evident; the president criticized Powell as a “bad head of the Fed” during a speech in Pennsylvania, while expressing that a candidate’s readiness to cut interest rates would serve as a litmus test for his selection. Powell's term is set to expire in May of next year, raising questions about the Fed’s direction moving forward.

Analysts at investment bank Compass Point suggest that a “decisively pro-crypto Fed Chair could accelerate blockchain's integration into the banking system.” This sentiment echoes the concerns of traders, who are increasingly focused on the implications of potential new leadership at the Fed. On Myriad, traders indicated a 73% chance that Hassett would be nominated before March.

In summary, as the Fed navigates complex economic signals, the impact of its decisions reverberates through various asset classes, including cryptocurrencies. The interplay between federal monetary policy and the digital asset market will continue to be a focal point for investors as they seek to understand the implications of these recent developments.