The Federal Reserve cut rates by 25 basis points for the third consecutive time to close out 2025, and for a brief moment, Bitcoin (BTC) and Ethereum (ETH) traders got excited. Then reality hit.
When Optimism Meets Reality
According to on-chain platform Santiment, retail enthusiasm peaked before the actual announcement. Lower rates typically boost risk assets by increasing liquidity and weakening the dollar, but when everyone expects good news, you get the classic "buy the rumor, sell the news" scenario.
Things got spicy when a whale offloaded $100 million in Bitcoin minutes before Jerome Powell opened his mouth. Volatility spiked hard. The decision itself wasn't shocking though. The Fed basically repeated what it's been saying: moderate growth, sticky inflation, and we'll adjust policy based on the data.
The Bigger Picture Looks Better
Despite the whiplash, the macro backdrop is actually improving for crypto. Bitcoin has lagged equities and gold significantly this year, which raises the odds of a catch-up rally as liquidity conditions improve. Smart-money wallets holding between 10 and 10,000 BTC have quietly accumulated over 42,000 BTC since November 30. That suggests the sophisticated players are positioning for a stronger 2026.
Retail Versus Whales
Social sentiment data reveals the dynamic clearly. Bitcoin traders stayed cautious, while Ethereum traders aggressively chased the post-FOMC pump. Then they got crushed when whales sold into the strength. It's a tale as old as time: retail chasing headlines while bigger players control the actual flow.
Short-term volatility isn't going anywhere, but three consecutive rate cuts, improving liquidity, and rising investor confidence create a much stronger setup than earlier in the year. Retail might stay jumpy, but disciplined investors see constructive conditions forming for Bitcoin and the broader crypto market heading into 2026.
The Liquidity Shift
A key change between October and December involved the Fed's liquidity stance. After slowing its balance-sheet runoff in October, the Fed reversed course in December, determining that reserves were too low and restarting Treasury bill purchases. Meanwhile, the labor market tone softened slightly, with the Fed acknowledging more persistent unemployment pressures.