Federal Reserve's 'cautious interest rate decision' triggers market upheaval... BTC crashes below $90,000, $400 million liquidation whirlpool

The Federal Reserve’s Cautious Stance Worsens Cryptocurrency Market Sentiment

Despite the U.S. Federal Reserve( Fed) cutting the benchmark interest rate by 0.25 percentage points, the cryptocurrency market was overwhelmed by disappointment sell-offs. Immediately after the December FOMC announcement, Bitcoin(BTC) fell below the psychological support level of $90,000, dropping over 3%. Ethereum(ETH) declined more sharply by 4%, breaking the $3,200 mark, and Ripple(XRP) also fell over 4%, putting the $2 support level at risk. The broad weakness across major cryptocurrencies reflected deteriorating market sentiment.

Internal Vote Reveals ‘Gradual Approach’ Signal from the Fed

The market expected an aggressive rate-cutting cycle, but the Fed’s internal stance was different from expectations. Out of 12 policy committee members, 9 supported a 0.25% rate cut, while 3 held different views. One advocated for a more aggressive 0.5% cut, while the remaining two preferred to keep rates unchanged. This division clearly indicated a cautious mood within the Fed.

What further chilled the market was the projected future rate path. Policy members anticipated only one rate cut of 0.25% in 2026 and 2027 each. Jerome Powell stated in a press conference, “The future policy stance will remain in a wait-and-see mode,” emphasizing that while rate hikes are off the table, a cautious approach will be maintained amid the labor market and inflation considerations. This outlook was far from the ‘strong easing phase’ that the market had been hoping for.

Massive Liquidation in the Derivatives Market

Price adjustments led to a massive explosion in the futures market. According to Coinglass( Coinglass) data, within 12 hours after the Fed announcement, a total of $440.2 million(about 62 billion KRW) in positions were forcibly liquidated across the entire cryptocurrency market.

The most notable aspect is the direction of liquidations. Long positions(buy) betting on price increases accounted for over 80%, totaling $334.8 million, while short positions(sell) betting on declines were only $15 million. This is interpreted as a classic long squeeze(Long Squeeze), where investors who entered with excessive leverage expecting FOMC favorable news are suddenly forced out due to the ‘cautious rate cut’ news.

To understand what a short squeeze means, imagine the opposite scenario. A short squeeze occurs when short positions betting on a decline are forcibly liquidated, typically during a rapid upward move. In this case, it was a long squeeze, where leveraged long positions were forcibly liquidated during an unexpected bearish phase, leading to a mass unwinding of leveraged buy positions.

Current Market Situation and Outlook

Currently, XRP is trading around $1.86 with active buying and selling, while BTC remains volatile around $87.83K and ETH around $2.95K. Overall market volatility remains high.

Industry experts say, “Until the Fed’s policy uncertainty is fully resolved, cautious positioning is essential,” and that “the pace of re-entering leverage will depend on upcoming employment and inflation data releases.” The market is expected to remain in an unstable phase, requiring participants to stay alert.