🚨 Why did crypto crash before the news of the Fed rate cut?
Many were surprised: it seemed that a rate cut would be positive for the markets. It should be rising! But instead, most cryptocurrencies fell. Why did this happen?
1. How it works
Major players (funds, market makers, exchange bots) know exactly where the crowd's orders are:
stop-losses, limit buys/sells
Before important news, they deliberately push the price sharply down to: - knock out the weak from positions, collect liquidity, buy cheaper from frightened traders
After the "shaking out," the market usually returns to the normal trend.
2. Why the crowd fell for it again
Psychology. The crowd reacts with emotions: saw the drop → panic → sell.
News as a cover. You can always say: "It’s all because of the rate." In reality, the drop was beneficial for the major players.
Information. Large players have access to order books and stop data, while ordinary people do not.
3. Example
Everyone was waiting for a rate cut → the crowd started buying crypto.
Before the news, major players pushed the price down → the crowd sold in panic.
The big players calmly bought the assets at a discount.
A few days later, the market went up again.