Why Crypto Tumbled After Fed’s 25 Bps Rate Cut: The Real Story Behind Today’s Dip

Markets just got a dose of Fed reality—and crypto's feeling the pinch.

The Federal Reserve's latest 25 basis point cut landed with a thud across digital assets, sending Bitcoin and altcoins into a collective slide. Turns out even 'forward guidance' can't outrun trader psychology.

Rate Cuts ≠ Risk-On Euphoria

Conventional wisdom said cheaper money would flood into speculative assets. Instead, traders interpreted the cut as defensive—a signal that economic headwinds might be stronger than anyone's admitting. Crypto markets, ever the drama queens, priced in the anxiety instead of the liquidity.

The Institutional Tug-of-War

While retail panic sells, whales are accumulating at these levels. Funny how the 'smart money' narrative only works one way until there's blood in the streets.

Where's The Bottom?

Technical support sits near the $50K zone for Bitcoin—a level that's held through three previous sell-offs. If it breaks, brace for another 15% drop. If it holds, we're looking at a classic buy-the-dip opportunity.

Never forget: Wall Street sells during rallies and buys during routs. Meanwhile, crypto Twitter alternates between 'TO THE MOON' and 'ABANDON SHIP' every 48 hours. Some things never change—and the Fed's power to spook markets remains one of them.

The crypto market dropped slightly after the Fed rate cut on Wednesday, September 17. As expected, the Federal Reserve initiated its first rate cut of 2025 by slashing its benchmark interest rate by 25 bps to 4% and 4.25%. Additionally, the Fed signaled a 50 bps rate cut before the end of this year, supported by the majority of the commissioners. 

However, the crypto market cap dropped 1% to hover about $4.1 trillion during the mid-North American session. Bitcoin (BTC) price slipped 1% to hit a range low of about $114,940 before rebounding slightly to trade around $115,698 at the time of this reporting.

Top Reasons Why Crypto Dropped After Fed Rate Cut

Sell-the-news Narrative

The crypto market was bound to experience a sell-the-news narrative following the Fed rate cut especially after the majority of traders predicted the outcome correctly. Traders who had been buying the rumors have accelerated profit-taking on the news today.

Fed Continues With Quantitative Tightening (QT)

While the Fed initiated its first rate cut of 2025, the commissioners voted to continue with Quantitative Tightening (QT). The Fed has been shrinking its balance sheet by selling government bonds. 

“The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities,” the Fed noted. 

As a result, the Fed will continue to pull liquidity from the financial system, thus weighing down on the crypto bullish outlook.

Technical Tailwind

Bitcoin and Ethereum had led the wider crypto market in a bullish outlook during the past few weeks but the momentum has gradually faded. For instance, Solana price has struggled to rally beyond $250, XRP price has failed to rally above $3.2, and ethereum price has experienced a significant supply wall around $4,777.