Trader’s playbook: why Fed liquidity cues matter more than ever for crypto

Digital currencies are experiencing significant bearishness, with faded liquidity preventing upsides and accelerating every dip.

Cryptocurrencies remained unmistakably cautious the past week, with major headlines failing to spark rallies, at least as analysts and traders expected.

The rate cut that failed to lift crypto

All eyes remained on the December 10 FOMC this week.

You will expect a rate cut to bolster the entire crypto space, especially due to the forecasted Q4 bull runs.

Generally, lower borrowing costs and new liquidity renew interest in risk-on assets.

However, that was not the script this week.

Cryptos soared briefly after the Fed executed the awaited 25-basis-point cut, but lost steam quickly as BTC failed to overcome the crucial resistance between $92,000 and $94,000.

Why the surprise/disappointing performance? While the rate cut was bullish, markets reacted to the Fed Chair’s tone.

Notably, Jerome Powell emphasised lingering high inflation and deteriorated labour markets, hinting that the central bank isn’t prepared to reopen liquidity taps sooner than anticipated.