Santiment breaks the trap

Crypto markets tumbled after the Federal Reserve delivered precisely what everybody stated they wished: the third consecutive 25 foundation level minimize to finish 2025. Santiment’s final deep dive makes a easy, barely uncomfortable level: retail handled it as a inexperienced mild, whales handled it as exit liquidity.

Bitcoin briefly rose to $94,044, Ether rose to $3,433, XRP reached $2.10 and Solana managed to succeed in $142, however the momentum was short-lived. At one level the BTC value fell by greater than 5%, ETH even fell by greater than 8.5%.

What triggered the crypto market decline?

On December 11, the FOMC reaffirmed a quarter-point minimize, which Santiment referred to as the “trifecta of cuts on the finish of 2025.” Decrease rates of interest imply cheaper borrowing, extra threat taking and – on paper – a friendlier surroundings for crypto. The Fed continues to explain an financial system rising at a “average” tempo, with inflation above goal, and at each its October and December conferences there’s speak of a downturn as “the steadiness of dangers (similar to slowing job progress) supported the easing coverage.”

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An important shift is liquidity. On October 29, the Fed determined to decelerate the discount of its securities holdings from December 1, slowing the tempo of steadiness sheet discount. On December 10, it went additional, saying that financial institution reserves had fallen “an excessive amount of” and saying renewed purchases of short-term authorities bonds to maintain reserves “adequate.” That is a step from shrinking the steadiness sheet to quietly including a refund into the system. As Santiment notes, the Fed remains to be depending on the numbers, however is clearly extra keen to ease to guard monetary situations.

Nevertheless, the markets had the main position. Forecasting platform Polymarket confirmed an “overwhelming quantity of optimism” within the hours earlier than Jerome Powell spoke. On the similar time, on-chain knowledge pointed to irregular exercise: @DeFiTracer noticed a whale promoting round $100 million price of Bitcoin inside an hour, inflicting “a wholesome mixture of sensational panic.” The anticipated end result – one other cutback – got here, however the positioning surrounding it was something however balanced.

Bitcoin’s value response initially appeared bullish. BTC spiked to round $94,044 after the announcement. Nonetheless, Santiment’s social knowledge reveals that the ratio of constructive to damaging feedback for Bitcoin had already peaked nicely earlier than Powell’s feedback. The viewers’s emotional excessive was stuffed with anticipation; When the precise rally hit, merchants had been “fairly modestly reactive” regardless of the transfer to 94K. The sentiment is spent.

Ethereum was even worse. In the identical 24-hour timeframe, ETH rose to round $3,433, and the constructive remark charge “was MUCH extra fascinating.” Santiment describes “a whole lot of FOMO after a mini-spike instantly after Powell spoke,” with many merchants “ending up shopping for” the breakout [getting] burned as ETH fell again to three,170.” It is the textbook ‘purchase the rumor, promote the information’ sample: bullish macro headline, bearish short-term value motion, retail shopping for the spike whereas bigger holders ‘eagerly’ pour their cash into the mini-rally.

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Structurally, nonetheless, the report just isn’t outright bearish. Because the starting of the yr, Santiment notes, Bitcoin is down about 3.6%, versus a 17.6% acquire for the S&P 500 and a putting 61.1% for gold. “It is a fairly dramatic distinction,” the group writes, arguing that “a regression to the imply for BTC could be justified.”

Now that three cuts have been carried out and reserves are being replenished by authorities bond purchases, the ‘catch-up’ for crypto versus shares and metals is changing into ‘even stronger’. Traditionally, crypto has “reacted later than shares or commodities when macro traits change.”

On-chain, the so-called good cash appears to behave as if that delayed response is coming. Wallets holding 10-10,000 BTC have added 42,565 Bitcoin since November 30. What’s “nonetheless [remaining]Santiment says, “is a outstanding retail mess, which might be indicative of the right recipe for a serious bull run.” For now, they count on smaller merchants “to proceed to undergo for at the least a couple of days from this constructive information on charge cuts.”

The core of the report is intentionally down-to-earth. The ultimate 2025 FOMC choice “reinforces a story of gradual easing, bettering liquidity, and a cautiously supportive surroundings for threat belongings.”

After a troublesome yr, “ending the yr with three consecutive charge cuts by the Fed is a powerful signal.” If inflation drifts towards the goal and financial knowledge stays steady, Santiment stated, 2026 may lastly give digital belongings “the respiration room they have been ready for.” Simply do not confuse that with an invite to chase the primary post-Fed spike — as a result of, as everybody was simply reminded this week, that is nonetheless the place crypto vacationers go to get burned.

On the time of writing, the whole crypto market capitalization was $3.04 trillion.

Featured picture created with DALL.E, chart from TradingView.com