Crypto Tanks After Fed Cut: Santiment Breaks Down The Trap
Crypto markets lurched decrease after the Federal Reserve delivered precisely what everybody mentioned they needed: the third straight 25bps minimize to shut out 2025. Santiment’s newest deep dive makes a easy, barely uncomfortable level: retail handled it as a inexperienced gentle, whales handled it as exit liquidity.
Bitcoin shortly rallied to $94,044, Ether surged to $3,433, XRP hit $2.10 and Solana managed to succeed in $142, however the momentum was short-lived. The BTC worth fell by greater than 5% at one level, ETH even fell by greater than 8.5%.
What Caused The Crypto Market Plunge?
On 11 December, the FOMC confirmed another quarter-point reduction, finishing what Santiment calls the “trifecta of cuts on the finish of 2025.” Lower charges imply cheaper borrowing, extra risk-taking, and—on paper—a friendlier backdrop for crypto. The Fed nonetheless describes an economic system rising at a “average” tempo with inflation above goal, and in each the October and December conferences it minimize as a result of “the stability of dangers (like slowing job development) supported easing coverage.”
The key shift is liquidity. On 29 October, the Fed determined to sluggish the discount of its securities holdings from 1 December, easing the tempo of balance-sheet runoff. By 10 December, it went additional, saying financial institution reserves had fallen “an excessive amount of” and saying renewed purchases of short-term Treasury payments to maintain reserves “ample.” That is a transfer from shrinking the stability sheet to quietly including a reimbursement into the system. As Santiment notes, the Fed continues to be data-dependent however clearly extra prepared to lean dovish to guard monetary situations.
Markets, nevertheless, front-ran the story. Prediction platform Polymarket confirmed an “overwhelming quantity of optimism” within the hours earlier than Jerome Powell spoke. At the identical time, on-chain knowledge flagged irregular exercise: @DeFiTracer noticed a whale promoting roughly 100 million {dollars}’ value of Bitcoin inside an hour, triggering “a wholesome mixture of sensationalized panic.” The anticipated final result—one other minimize—arrived, however positioning round it was something however balanced.
Bitcoin’s worth response appeared bullish at first. BTC spiked to about $94,044 after the announcement. Yet Santiment’s social knowledge exhibits that the positive-versus-negative commentary ratio for Bitcoin had already peaked nicely earlier than Powell’s remarks. The crowd’s emotional high got here in anticipation; when the precise rally hit, merchants had been “fairly modestly reactive” regardless of the transfer to 94K. Sentiment was spent.
Ethereum was worse. Over the identical 24-hour window, ETH surged to round $3,433, and the constructive remark ratio “was a LOT extra fascinating.” Santiment describes “a number of FOMO after a mini surge instantly after Powell spoke,” with many merchants who purchased the breakout “ultimately [getting] burned when ETH fell again down to three,170.” It is the textbook “purchase the rumor, promote the information” sample: bullish macro headline, short-term bearish worth motion, retail shopping for the spike whereas bigger holders “gladly” offload into the mini-rally.
Structurally, although, the report shouldn’t be outright bearish. Year-to-date, Santiment notes, Bitcoin is down about 3.6%, versus a 17.6% acquire for the S&P 500 and a putting 61.1% for gold. “It’s fairly the dramatic distinction,” the group writes, arguing that “a regression to the imply for BTC can be justified.”
With three cuts now locked in and reserves being topped up by way of T-bill purchases, the “catch-up” case for crypto versus equities and metals “turns into even stronger.” Historically, crypto “has reacted later than equities or commodities when macro developments shift.”
On-chain, so-called good cash seems to be appearing as if that delayed response is coming. Wallets holding 10–10,000 BTC have added 42,565 Bitcoin since 30 November. What is “nonetheless [remaining],” Santiment says, is “a notable dump from retail, which might be indicative of the right recipe for a serious bull run.” For now, they anticipate smaller merchants to “run on fumes from this constructive information of charges getting minimize, for at the least a few days.”
The backside line of the report is intentionally sober. The remaining FOMC resolution of 2025 “reinforces a story of gradual easing, improving liquidity, and a cautiously supportive environment for risk assets.”
After a tough yr, “ending the yr with three consecutive fee cuts from the Fed is a powerful signal.” If inflation drifts towards goal and financial knowledge stays secure, Santiment argues, 2026 may lastly give digital belongings “the respiration room they’ve been ready for.” Just don’t confuse that with an invite to chase the primary post-Fed spike—as a result of, as this week simply reminded everybody, that’s nonetheless the place crypto vacationers go to get burned.
At press time, the overall crypto market cap was at $3.04 trillion.
