Bybit analysis notes that the initial tailwind from Fed easing quickly faded after Powell refused to pre-commit in December, and institutional options traders were firmly in a defensive hedging position.
summary
- Bybit said the Fed's October rate cut briefly boosted cryptocurrencies before Powell's cautious tone dampened sentiment.
- U.S. Treasury yields reversed higher as traders priced in the possibility of a December pause.
- Privacy tokens like Zcash have outperformed, reflecting the search for alpha beyond macro trends.
Analysts at Bybit said in their latest Crypto Insights Report that the Federal Reserve's October 29 interest rate cut only provided a temporary boost to digital assets, with sentiment dampening. The Fed's decision to cut the federal funds rate by 25 basis points to a range of 3.75% to 4% initially sparked optimism across risk markets.
However, the rally quickly subsided as Chairman Jerome Powell was reluctant to signal further easing in December. Bybit noted that while Bitcoin (BTC) and Ether (ETH) are rising on softening yields, institutional options traders continue to defend their positions, suggesting limited confidence in a sustained policy shift.
“The Fed's October rate cut marked a pivotal moment in its 2025 policy cycle, marking a shift to supporting growth amid persistent inflation and labor market fragility. Although this action was widely expected, the ripple effects on both traditional and digital asset markets were by no means uniform,” Bybit analysts wrote.
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Mixed market signals obscure the Fed's impact
The emotional divide was not limited to digital assets. Bybit's report highlights how Powell's cautious tone led to a sharp reversal in the U.S. Treasury market. Yields, which had fallen on expectations for a rate cut, suddenly reversed and rose as traders priced in the possibility of a policy pause in December.
On the other hand, the credit market remained strong. Bybit noted that the Fed's decision to halt balance sheet outflows starting December 1 reflects growing concerns about liquidity in short-term money markets. This is a signal that policymakers are stimulating demand while also managing risk.
Bybit's report highlighted how this uncertainty is paradoxically reinvigorating parts of the digital asset space. Analysts pointed to the significant growth of privacy tokens like Zcash as evidence of this shift.
BTC and ETH moved with macro trends, but these assets were decoupled by their own internal catalysts. This shows that in the absence of a clear dominant macro narrative, capital is starting to look for alpha in corners of the cryptocurrency ecosystem that are less tied to the Fed's next moves.
The broad conclusion from Bybit's analysis is that the crypto market is entering a period of fundamental maturity. It increasingly behaves as a high-beta macro asset, sensitive to liquidity shifts from financial institutions like the Fed, but no longer overly dependent on it.
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