Many cryptocurrencies are currently experiencing a strong upward movement, driven by macro-economic signals from the United States. Recent remarks from the White House about potential interest rate cuts have led to explosive market dynamics, with Bitcoin (BTC) and Ethereum (ETH), in particular, benefiting from a powerful short squeeze.

Unexpected Demand: Mass Closure of Short Positions

The rapid price increase was amplified by a wave of liquidations, according to data from Coinglass. Over the past twenty-four hours, more than 105,000 traders were liquidated, totalling over $390 million. Notably, the vast majority, a staggering $310 million, originated from short positions. This indicates that many traders were betting on a decline but were forced to close their positions due to the unexpected rally, further fuelling upward pressure on prices.

There were $135.21 million in liquidations for Bitcoin (BTC) and $96.57 million for Ethereum (ETH) over the past 24 hours. The largest single liquidation was recorded on the HTX exchange in the BTC/USDT market, valued at almost $24 million.

Policy Signals from Washington Encourage Risk-Taking

The positive market sentiment received a significant boost thanks to reassuring messages from Washington. White House advisor Kevin Hassett hinted that there is "ample room" for interest rate cuts. Shortly thereafter, President Trump indicated that he does not rule out a reduction in certain import tariffs. Both statements were interpreted by the market as a possible easing of economic policy. Such a tone is generally very favourable for risky assets, including cryptocurrencies.

Interest Rate Chaos: Will the Fed Cut Rates Today?

Expectations for an interest rate cut by the Federal Reserve during the two-day meeting (today and tomorrow) have significantly increased in recent days. According to the CME FedWatch Tool, the market currently estimates the probability of a 25 basis point cut at nearly 90%. Large financial institutions, including Morgan Stanley, J.P. Morgan, and Bank of America, also anticipate a first step downwards.
Analysts at Morgan Stanley call the earlier scepticism about a cut "a misconception" and even foresee further steps in January and April. However, they expect a so-called 'hawkish cut': an interest rate reduction accompanied by cautious communication to prevent markets from becoming overly enthusiastic too quickly.

Why Lower Rates are Important for Crypto

Lower interest rates have a direct effect on financial markets:

They lower financing costs, which is beneficial for businesses.

They stimulate the risk appetite of investors.

They make long-duration assets, such as technology stocks and crypto, relatively more attractive.

Historically, both stock markets and the crypto market react strongly to these types of major policy changes. While the current combination of short squeezes and positive macro signals can rapidly push the market higher, traders are still awaiting official confirmation from the Federal Reserve. If the Fed does indeed initiate the first cut, this could further strengthen the current upward momentum. Until then, the market remains extremely sensitive to macro-economic news and the subsequent liquidations.

Disclaimer: This is not financial advice. Always consider conducting your own research and professional advice before investing.