$70 Billion Vanishes Overnight: Why Bitcoin Crashed After Fed Rate Cuts

 

$70B Crypto Market Crash: Fed Cuts Fail to Calm Bitcoin and Ethereum Sell-Off

The global cryptocurrency market witnessed another sharp decline on October 31, 2025, as traders reacted to a complex mix of macroeconomic and geopolitical pressures. Despite the U.S. Federal Reserve’s decision to cut interest rates, Bitcoin and Ethereum plunged, erasing more than $70 billion in market value within 24 hours. Analysts attribute the downturn to a cocktail of inflation fears, a prolonged U.S. government shutdown, and aggressive whale sell-offs that amplified volatility across digital assets.

Fed Rate Cuts Backfire as Market Sees Deeper Risks

The U.S. Federal Reserve’s October meeting brought a widely expected 25-basis-point rate cut, bringing the federal funds rate range down to 3.75–4.00 percent. While many investors had hoped that a rate reduction would spark risk-on sentiment and propel crypto prices higher, Federal Reserve Chair Jerome Powell’s cautious tone had the opposite effect.

Powell emphasized that inflation “remains somewhat elevated” and warned that “downside risks to employment” persist as the U.S. economy shows signs of slowing growth. His remarks tempered expectations for further cuts in 2025, leading traders to interpret the move as a signal that the economy could be entering a period of stagnation rather than recovery.

The cautious tone spooked markets across the board. Bitcoin dropped by 2.35% to as low as $108,378 before a mild recovery to $110,248, while Ethereum fell 2.15% to $3,898. The overall crypto market capitalization slipped to $3.81 trillion, a 2.1% decline in a single day.

“Normally, a rate cut supports risk assets,” said Michael Reinhardt, a senior strategist at ChainWave Analytics. “But when rate cuts come alongside warnings of economic weakness, it signals trouble. The market sees that as the Fed preparing for a slowdown, not a rebound.”

U.S. Government Shutdown and Data Blackout Deepen Panic

Adding to the uncertainty is the ongoing U.S. government shutdown, now stretching into its 30th consecutive day. The shutdown has halted the publication of critical economic data, including GDP, jobs reports, and consumer spending figures — leaving traders flying blind.

Source: X

“With the data blackout, markets have lost their compass,” said Elena Garcia, an economist at Liberty Macro Research. “Investors can’t gauge the real state of the economy, which makes them hesitant to hold volatile assets like crypto.”

The shutdown’s ripple effects are being felt beyond government agencies. Many federal workers remain unpaid, consumer confidence has dipped, and businesses reliant on government contracts are slowing down operations. Historically, such conditions push traders toward safe-haven assets like gold or the U.S. dollar, while speculative sectors — including cryptocurrencies — face heavy sell-offs.

Housing Crisis Adds Pressure on Financial Stability

The financial stress is also reflected in the housing market. According to The Kobeissi Letter, the U.S. housing affordability ratio has hit an all-time high of 4.4x, surpassing even the levels seen during the 2006 housing bubble. Since 2011, home prices have risen by 139%, while median household incomes have increased by just 68%.

This widening gap underscores growing concerns about the health of American households. “When housing becomes unaffordable for most citizens, you start to see risk aversion in all corners of the economy,” said Kobeissi in an X post. “Crypto is usually the first to be sold when people need liquidity.”

Investors are increasingly wary that a deteriorating housing market, coupled with a prolonged government shutdown, could nudge the U.S. economy toward a mild recession — a scenario that historically drags crypto valuations lower.

Whale Sell-Offs and Market Liquidations Accelerate the Decline

While macroeconomic uncertainty provided the backdrop, large-scale movements by so-called “crypto whales” magnified the market’s downward spiral. According to data from LoonOnChain, a major Ethereum whale address, identified as 0x5509, sold 10,000 ETH (worth approximately $39.1 million) at a loss exceeding $7.5 million. Ethereum co-founder Vitalik Buterin also reportedly liquidated 14,216 USDC worth of memecoins.

Source: X

Meanwhile, long-time Bitcoin investor Owen Gunden offloaded 2,587 BTC (around $290 million) on Kraken over a 10-day span, further fueling bearish momentum. The combined sales triggered a cascade of liquidations across major exchanges.

Data from Coinglass shows that more than 164,000 traders were liquidated in the past 24 hours, amounting to a staggering $825 million in forced sell-offs. The largest single liquidation — worth $11 million — occurred on Bybit in BTC/USD futures. The aggressive unwinding of leveraged positions exacerbated market losses and heightened intraday volatility.

“Once liquidations start, they tend to snowball,” explained Eric Tan, a derivatives analyst at MatrixPort. “It’s a chain reaction that hits both retail and institutional traders alike.”

Trade Talks Between Trump and Xi Offer Short-Lived Relief

Amid the turmoil, global attention briefly shifted to Seoul, where U.S. President Donald Trump met Chinese President Xi Jinping for the first time in over six years. Their meeting produced a limited but symbolic one-year trade deal covering rare earth elements and critical minerals. The agreement included a reduction in overall U.S. tariffs from 57% to 47% and a cut in fentanyl tariffs to 10%, while China promised to relax chip export restrictions with Nvidia.

Trump described the meeting as “very productive,” adding that both nations had “agreed on much” and were “moving toward a more balanced trade relationship.” However, analysts warned that the market remains skeptical until concrete actions follow the rhetoric.

“This meeting gives temporary relief,” said Daniel Murray of Frontier Capital. “But crypto markets thrive on confidence, not promises. Until there’s verified progress, traders will continue to de-risk.”

Contrarian Bets Emerge as Some Whales Go Long

Despite the heavy sell-off, some large investors appear to view the drop as a buying opportunity. On-chain data from LookOnChain identified two major whale addresses — 0x9553 and 0x6988 — opening 40x long BTC and 25x long ETH positions, respectively, signaling growing conviction that the market has overreacted.

This contrarian behavior echoes previous market cycles, where aggressive selling was often followed by sharp rebounds. Analysts note that Bitcoin’s fundamentals remain strong, with network hashrate, active addresses, and institutional inflows continuing to show resilience even during price corrections.

“Short-term volatility doesn’t change long-term adoption,” said Yvonne Chu, a senior trader at Galaxy Digital. “Institutional players are waiting for dips like this to accumulate.”

What’s Next for the Crypto Market

Looking ahead, analysts are divided on the short-term direction of the crypto market. Some predict that macroeconomic headwinds will keep Bitcoin under pressure for weeks, while others see this as a healthy correction before another leg up. Much depends on the U.S. government’s ability to end the shutdown and restore key economic reporting.

If inflation cools in the coming months, the Fed could deliver another rate cut early next year, potentially reigniting risk appetite. Meanwhile, traders are closely watching for new liquidity flows from Asia, where crypto adoption continues to surge, particularly in Hong Kong, Singapore, and South Korea.

For now, the market remains volatile, and sentiment fragile. Bitcoin’s next key support lies around $106,000, with resistance at $113,500. Ethereum’s near-term support sits at $3,820, with upside potential capped near $4,000. A decisive break in either direction could set the tone for the final quarter of 2025.

Conclusion

The crypto market’s $70 billion wipeout reflects more than just a reaction to a Fed rate cut. It embodies the convergence of global uncertainty, political gridlock, housing stress, and investor fear. While short-term sentiment has clearly soured, underlying confidence in blockchain innovation and digital assets remains intact among long-term holders.

As history has shown, crypto markets often rebound strongest after periods of capitulation. Whether this downturn marks the start of a broader correction or a brief pause before the next bull run will depend on how global policymakers navigate inflation, data transparency, and investor confidence in the months ahead.

Writer @Ellena

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

 Check out other news and articles on Google News

Disclaimer:

The articles published on hokanews are intended to provide up-to-date information on various topics, including cryptocurrency and technology news. The content on our site is not intended as an invitation to buy, sell, or invest in any assets. We encourage readers to conduct their own research and evaluation before making any investment or financial decisions.

hokanews is not responsible for any losses or damages that may arise from the use of information provided on this site. Investment decisions should be based on thorough research and advice from qualified financial advisors. Information on HokaNews may change without notice, and we do not guarantee the accuracy or completeness of the content published.