After the Federal Reserve announced a rate cut, why did the cryptocurrency market experience a sharp decline?

On October 29, the cryptocurrency market experienced a significant drop, with Bitcoin price falling from this week's high of $116,400 to $109,200, and the overall market capitalization shrinking to $3.84 trillion. Most altcoins followed the decline, with single-day drops exceeding 5%.

Analysts believe that this decline in the cryptocurrency market is partly unrelated to the rate cut by the Federal Reserve.

Jerome Powell issued a statement this morning, announcing a 25 basis point rate cut, lowering the interest rate range to 3.75%–4%, hitting a new low since 2022. However, the cryptocurrency market unexpectedly experienced a substantial fall.

This abnormal phenomenon stems from the market having already priced in the rate cut expectations in advance. Although the Federal Reserve announced a 0.25% decrease to the 3.75%–4% range, setting a new low since 2022, the cryptocurrency market did not rise but fell instead.

This abnormality is due to the market having already digested the rate cut expectations, as most analysts had accurately predicted this rate cut, leading to the classic "buy the rumor, sell the fact" scenario.

It should be noted that the Federal Reserve's rate cut is not the only reason investors are dumping cryptocurrencies. The meeting between Chinese and U.S. leaders today at the APEC summit in South Korea also attracted global attention. Despite these positive signals that should logically boost the market, they did not prevent investors from selling off cryptocurrencies.

In addition to the above factors, the surge in crypto liquidations on Wednesday further intensified today's market decline. According to CoinGlass data, crypto liquidations over the past 24 hours skyrocketed by 75%, reaching $590 million.

Further analysis shows that this sharp increase in liquidations is closely related to the ongoing deleveraging process among investors. Data indicates that open interest in futures contracts has fallen to $164 billion, down significantly from $228 billion at the beginning of the month.

Moreover, more data suggests that trader sentiment on major exchanges is gradually shifting, with more traders turning bearish.

Currently, long positions account for only 49%, while short positions have risen to 51%. These series of data changes clearly highlight that the current cryptocurrency market is under immense pressure and faces many instability factors. Market sentiment is quite pessimistic, and investor confidence has been severely impacted.

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