BTC, SOL fall as Fed’s Hawkish cut overshadows US-China optimism & SOL ETF launch

Bitcoin is falling sharply, breaking below a key support to 107.6k at the time of writing. The selloff is seen across the crypto space, with Ethereum falling almost 5% over the past 24 hours and Solana tumbling 6%. The total cryptocurrency market capitalization is down 3.7% to $3.64 trillion. 

Bitcoin is falling for a fourth straight session after the Federal Reserve cut interest rates as expected, but Federal Reserve chair Jerome Powell adopted a more hawkish tone. The Fed cut rates by 25 basis points to 3.75 to 4% marking the second rate cut this year. However, Federal Reserve chair Jerome Powell has raised doubts over the likelihood of another rate cut in December, noting that another rate cut was not a forgone conclusion. 

While Powell highlighted concerns about the weakening labour market, he also warned of lingering inflation and an uncertain economic outlook amid a data drought from the US government shutdown. 

Going into the announcement, the market was 90% convinced that the Federal Reserve would cut rates again in December. However, following the announcement, the market ia pricing in a 70% rate cut. 

The lowering of rate-cut expectations overshadowed news that the Fed will end its Quantitative Tightening programme, another move to loosen monetary policy, which should be bullish for BTC’s outlook.  It also overshadowed optimism surrounding the Trump-XI Jinping meeting. 

Trump lowered tariffs on China to 47% from 57% in exchange for China resuming soybean purchases, keeping rare earth exports flowing, and cracking down on fentanyl trafficking. While this fell short of an all-out trade deal, it indicated a further de-escalation of tensions. 

SOL ETFs launch, but SOL tanks – sell the news event? 

Two separate SOL ETFs started trading this week. Grayscale Investments launched its staking-enabled SOL spot ETF (GSOL) on Wednesday, while Bitwise Solana staking ETF (BSOL) went live on Tuesday. 

According to SoSoValue, spot SOL ETFs booked $69.4 million in net inflows on Tuesday and $47.94 million on Wednesday. Despite the long-awaited launch, SOL’s price has fallen sharply, rather than rallying, in a sell-the-news event. 

While the hawkish Fed rate cut hasn’t helped, it’s also worth remembering that BTC’s and ETH’s ETF launches had similar price reactions at launch, with BTC and ETH initially falling before inflows really spiked, lifting the price. SOL could be experiencing a similar initial reaction. However, longer-term institutional demand could support SOL. JP Morgan predicts the SOL ETF would attract $3 to $6 billion in its first year, putting the token in the big league alongside ETH and BTC. 

SOL/USDT technical analysis 

SOL failed to retake the 50 EMA at 200 and rebounded lower, taking out support at 188, and it has headed towards 173, the next support level. The bearish engulfing candle and the RSI below 50 keep sellers hopeful of further declines. A break below 173 —the 61.8% Fib retracement —opens the door to 152. Buyers will need to retake the 50 EMA and 200 psychological level to create a higher high. 

Open free account

Trading involves risk.