Bitcoin staged a partial recovery after a sharp and sudden crash triggered by the Federal Reserve’s latest interest rate decision. On July 30, the leading cryptocurrency dropped from approximately $118,600 to a low of $115,784 following the Fed’s announcement to hold interest rates steady—defying widespread market speculation of a potential cut.
By early morning on July 31 (2:40 a.m. EST), Bitcoin had bounced back, briefly trading above $118,900 before settling around $118,738. The rapid dip and subsequent rebound underscored the extreme sensitivity of crypto markets to macroeconomic signals, particularly monetary policy decisions from major institutions like the Federal Reserve.
$431 Million in Crypto Liquidations Amid the Flash Crash
The price whipsaw triggered widespread liquidations across the cryptocurrency market, wiping out a total of $431 million in leveraged positions within just 24 hours. As expected, long positions bore the brunt of the damage, especially across the top five cryptocurrencies.
Ethereum (ETH) saw the largest liquidation of long positions, totaling $61.87 million, followed by Bitcoin at $58.49 million. Solana (SOL) faced $27.33 million in liquidations, while XRP and Dogecoin (DOGE) recorded $14.70 million and $11.88 million respectively. The magnitude of these liquidations highlights how volatile market reactions to macro events can quickly cascade into massive losses for overleveraged traders.
Fed Holds Rates, Markets React with Volatility
The flash crash closely followed the U.S. Federal Reserve’s decision to maintain interest rates, a move that disappointed a segment of the market hoping for a pivot toward easing. Despite the rate-hold being largely anticipated, growing political pressure and public speculation had fueled hopes of a dovish turn.
This decision was particularly notable as it came amid increasing friction between Fed Chair Jerome Powell and U.S. President Donald Trump. In the days leading up to the Fed’s announcement, the Trump administration had signaled dissatisfaction with the Fed’s policy stance. Reports confirmed that President Trump had initiated the search for a new Federal Reserve governor, intensifying rumors that Powell might be dismissed.
Trump’s July 24 visit to the Federal Reserve headquarters, coupled with his criticisms over the Fed’s reluctance to lower interest rates, were seen by many as strategic maneuvers to influence central bank policy. However, the Fed’s decision remained firm. The Federal Open Market Committee (FOMC) voted 9–2 in favor of maintaining the current interest rate, with two dissenting votes marking the first time more than one member opposed the decision in a single meeting—underscoring internal debate amid growing political and market pressure.
Market Sentiment Shifts: Dow Jones and Blockchain Predictions
The broader financial markets echoed crypto’s volatility. The Dow Jones Industrial Average dropped 300 points immediately following the Fed’s announcement, reflecting general market disappointment and uncertainty.
Interestingly, market sentiment data from blockchain-based prediction platform Polymarket indicated a significant shift in expectations. Before the FOMC decision, the probability that the Fed would keep interest rates unchanged stood at 38%. After the announcement, that probability surged to 57%, suggesting that traders are adjusting their forecasts and bracing for prolonged monetary tightening.
The Bigger Picture
The Fed’s commitment to holding rates steady, citing persistent inflation concerns, serves as a reminder that monetary policy will remain restrictive in the near term—despite mounting calls from political leaders and risk-on investors.
For Bitcoin and the broader crypto market, this environment translates to continued macro-driven volatility. While digital assets have grown increasingly resilient, their correlation with traditional finance and reliance on speculative capital make them particularly susceptible to sudden shocks—especially when leveraged trading is involved.
Going forward, traders and investors will need to remain cautious and adaptive. With interest rate policy staying tight and no clear signal of an impending pivot, crypto markets may continue to face turbulence in the weeks ahead.
Conclusion:
The recent flash crash and liquidation wave serve as a cautionary tale about the outsized impact macroeconomic policy can have on crypto assets. While Bitcoin’s quick rebound demonstrates strong underlying demand, the market’s fragility under stress is a stark reminder of the risks associated with high leverage and macro dependency.
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