Market Commentary: Volatility in Crypto Markets after Fed Rate Cuts — Bitcoin Falls Below USD 90,000, What Comes Next?

Summary
The U.S. Federal Reserve’s final policy meeting of 2025 has concluded with a clear policy shift. On December 10 (EST), the Fed announced its third consecutive rate cut and resumed purchases of short-term Treasuries — signaling a transition from monetary tightening toward a neutral-to-accommodative stance. However, the crypto market did not see a one-sided rally. Major cryptocurrencies such as Bitcoin (BTC) briefly surged before retreating sharply by more than 2%, once again falling below the USD 90,000 mark to around USD 89,000 — the lowest level since December 7. As policy direction shifts, investors — particularly within the digital asset market — will closely watch how the next chapter unfolds. We believe major crypto assets have entered a new phase characterized by “mid-to-high level consolidation and structural rotation,” with greater volatility likely among non-mainstream altcoins.

Market Characteristics after the Rate Cut

The Federal Reserve lowered the federal funds rate by 25 basis points to a target range of 3.5%–3.75%. This marks the third successive rate cut and was accompanied by the resumption of short-term Treasury purchases to maintain ample reserves. Chair Jerome Powell described current rates as being in a roughly neutral zone, suggesting the urgency for further aggressive cuts has diminished. Going forward, markets will likely refocus on data and fundamentals.

Following the announcement, Bitcoin briefly spiked to USD 94,000 before strong selling pressure emerged, pushing prices below the USD 89,000 threshold. Similar patterns were observed across other major tokens including Ether (ETH) and Solana (SOL), which rallied initially before reversing lower once the rate decision was priced in.

Structural Capital Flows and Market Rotation

Throughout 2025, spot Bitcoin ETFs have continued to record steady net inflows, with total yearly inflows exceeding USD 10 billion. This trend indicates that institutional investors are increasingly treating Bitcoin as a “long-term allocation and growth-oriented asset” rather than merely a speculative instrument, even under higher-rate conditions.

As the rate-cut cycle begins and the risk-free rate declines, this backdrop should favor higher valuations for risk assets — especially those with strong liquidity and regulated access routes, such as Bitcoin and Ether. However, the rise of ETFs and over-the-counter products has concentrated capital within leading assets. Consequently, weaker altcoins are more vulnerable to liquidity withdrawals and sharp price corrections during periods of shifting risk appetite.

In terms of capital rotation, a short-term trend has emerged: funds are moving from small-cap tokens back into major assets, from leveraged derivatives back into spot markets, and from unregulated venues back into licensed exchanges. These dynamics reflect the combined effects of monetary easing and tightening regulatory scrutiny.

Possible Market Scenarios Ahead

From a macro perspective, if the Fed maintains a gradual easing pace while successfully avoiding a hard landing, markets could enter a “low-growth, low real-rate” environment. Such conditions would support a gradual valuation recovery across risk assets, potentially allowing Bitcoin and Ether to sustain a mid-phase expansion within a late-stage bull market. In this scenario, major cryptocurrencies may trade within high consolidation ranges, serving as relative safe havens during global risk-off periods, rather than descending into a deep bear cycle reminiscent of 2019–2020.

Conversely, if economic data weakens considerably and markets begin pricing faster rate cuts to offset recession risks, a “recession trade” could emerge — with equities and high-risk crypto assets coming under simultaneous pressure. Capital may temporarily flow toward cash and high-grade bonds, while Bitcoin oscillates between its roles as both a risk asset and a safe-haven store of value, resulting in heightened volatility. Furthermore, if inflation unexpectedly rebounds and forces the Fed to re-adopt a hawkish bias, digital assets could face renewed valuation compression and liquidity contraction, reminiscent of the previous tightening cycle — posing particular risk to highly leveraged positions.

EX.IO’s Commitment to Investors

In an environment of rapidly evolving macro conditions and market structures, EX.IO, as a licensed Virtual Asset Trading Platform (VATP) in Hong Kong, remains committed to delivering premium services across multiple dimensions. The platform provides regulated trading channels, ensures robust asset custody and risk management practices, and upholds market integrity in full compliance with local regulatory requirements.

Additionally, EX.IO continues to enhance investor understanding through educational content and research publications, helping users analyze how macroeconomic and market factors influence digital asset prices. With these ongoing initiatives, the platform aims to grow alongside investors and deliver the highest-quality service to all clients.

[Disclaimer]
Markets involve risk, and investment decisions should be made with caution. This article does not constitute investment advice. Readers should carefully consider whether any opinions, views, or conclusions expressed herein are appropriate for their individual circumstances. All investments made based on this publication are at the investor’s own risk.