Crypto Pauses After Hitting 2-Week Highs; All Eyes on Fed Decision This Week

The crypto market saw a burst of optimism Monday, pushing Bitcoin above $116,000 and Ethereum past $4,240, both two-week highs, according to Santiment data from yesterday. This surge was clearly driven by traders positioning ahead of the U.S. Federal Reserve’s critical two-day policy meeting (October 28-29), betting heavily on another interest rate cut.

However, Tuesday brought a slight cooling, with Bitcoin pulling back towards $114,000 and Ethereum slipping below $4,100. This pause indicates the market digesting Monday’s gains and adopting a more cautious stance as the actual Fed decision looms.

Yesterday’s move higher was textbook front-running of a dovish Fed. The market holds a near-consensus expectation for the FOMC to announce a 25-basis-point rate cut on (2:00 p.m. ET). This conviction stems from recent softer U.S. economic indicators, particularly in the labor market, and inflation readings that have generally undershot forecasts.

Lower interest rates typically make borrowing cheaper and reduce the appeal of holding cash, historically encouraging capital flows into higher-risk assets like crypto. Monday’s rally reflected the market pricing in this anticipated boost to liquidity.

Further evidence of Monday’s risk-on sentiment came from sector performance. Santiment’s data highlighted that tokens associated with Artificial Intelligence (AI) and Decentralized Finance (DeFi), like Fetch.ai (FET), Ocean Protocol (OCEAN), and Render (RNDR), were among the strongest performers. This rotation into higher-beta segments signaled increasing market confidence, often seen when traders anticipate easier monetary conditions.

While Bitcoin led social media buzz yesterday, the outperformance of these riskier altcoins showed capital actively moving out on the risk curve in anticipation of the Fed’s decision.

Today’s slight pullback demonstrates the limits of trading the rumor. While the 25bps cut is largely expected and likely factored into Monday’s prices, its immediate impact post-announcement might be muted.

The real volatility trigger now becomes Fed Chair Jerome Powell’s press conference remarks following the decision. Think of the rate cut as the opening act; Powell’s commentary is the main event. If he signals a clear path towards further easing or downplays lingering inflation concerns, it could reignite Monday’s rally.

However, any hint of hawkishness, emphasizing data dependence, persistent inflation risks, or uncertainty about future cuts, could quickly unwind the recent gains. The market is now in a holding pattern, waiting entirely on Powell’s tone to dictate the next directional move.