Crypto Liquidations Exceed $1B Following Controversial Fed Statements

The Federal Reserve announced a 25 basis point interest rate cut, reducing the federal funds rate target range to 4.25%-4.50%. This marks the third consecutive rate cut, totaling 100 basis points in reductions this year

Despite the expected liquidity boost, markets reacted negatively, but also triggered crypto liquidations. U.S. stock indices dropped significantly, with the Nasdaq down 3.56%, the S&P 500 falling 2.95%, and the Dow Jones experienced a 10-day losing streak —its worst since 1974. 

The cryptocurrency market also saw steep declines, with Bitcoin briefly dropping below $100,000 and altcoins facing widespread losses of over 10%.

Data from CoinGlass shows crypto liquidations sparked to $1.1B, most of them long positions. A behemoth $515.81M long position was the largest one registered, and it occurred on Binance.

Fed Statements Spark Crypto Liquidations

It all comes Jerome Powell’s recent statements, as the Federal Reserve Chair delivered some hawkish comments on the institution’s future economic decisions.

While acknowledging the rate cut, he warned that future decisions would be made “cautiously.” He also described the December rate cut as “a challenging decision” but the “right” one, indicating that further rate cuts would only happen if inflation showed meaningful improvement.

Moving on, all decisions for next year will be based on actual economic data and not current forecasts, which is a departure from expectations earlier this year, which had predicted more aggressive rate cuts in the near future.

Moreover, the Fed’s updated projections show that by the end of 2025, the federal funds rate may drop to 3.75%-4%, suggesting only two rate cuts next year—much fewer than the four cuts anticipated in September.

That explains the stock market downturn, but what about the crypto market?

Well, in short —the Fed does not intend to be involved in any sort of government effort to create a Bitcoin strategic reserve.

 We are not allowed to own Bitcoin. The Federal Reserve Act specifies what the Fed can own, and the Fed is not seeking to change that. This is a matter for Congress to consider, but the Fed does not wish to change the law.

Related: Binance’s Liquid Staking Solana Token BNSOL Sees Total Market Cap Surge to $1.3 Billion

The comment came in response to a question about his thoughts on the cryptocurrency and if he saw any value in creating Donald Trump’s much-anticipated Bitcoin reserve.