Fed Rate Cut Triggers Bitcoin Breakdown – Will BTC Crash Back to $105,000?

Introduction

Bitcoin has lost a key support level following the Federal Reserve’s latest interest rate cut, sparking fears of a potential Bitcoin price retracement to $105,000. According to on-chain data, the critical $115,200 mark represents the cost basis for nearly 95% of Bitcoin’s circulating supply, making it a vital psychological and technical support area. If Bitcoin fails to recover this level, analysts warn that the digital asset could slip toward a retest of $105,000, raising concerns for both long-term holders and short-term traders seeking market stability (CryptoSlate).

Despite growing institutional demand for cryptocurrencies after the Fed’s rate cut, Bitcoin’s inability to sustain gains above support has amplified volatility across the broader crypto market. Altcoins like Ethereum and Solana have seen renewed momentum, but Bitcoin remains at a crossroads, oscillating between bullish inflows and bearish pressure. Market strategists emphasize that the next major move will depend on whether Bitcoin can reclaim levels near $115K or accelerate its downside trajectory toward the $105K demand zone.

Looking ahead, Bitcoin traders are closely monitoring liquidity conditions and leverage in the derivatives market, as massive funding outflows or liquidations could trigger sharp moves before year-end. Analysts suggest that Bitcoin’s near-term direction hinges on reclaiming lost support, highlighting a pivotal range between $108,000 and $124,000 as the zone to watch. Any failure to hold these levels could validate the $105,000 retest scenario, potentially resetting bullish momentum and delaying the next Bitcoin rally.

Background

The Federal Reserve’s latest 0.25-point rate cut rippled through global markets and pushed Bitcoin below the long-defended $115 K support band—an area that on-chain data show is the cost basis for roughly 95 % of all BTC in circulation (CryptoSlate). When a price drops under a widely-held cost basis, many holders fall underwater, increasing both liquidation risk and anxiety-driven selling. If buyers fail to reclaim the zone quickly, several analysts now flag a potential retest of $105,000—the next dense cluster of historical bids and the lower edge of Bitcoin’s mid-2025 range.

Why a Fed rate cut can hurt before it helps

Cutting the Federal Funds Rate is designed to add liquidity, yet the immediate reaction often resembles a “buy the rumor, sell the news” event. Lower yields make risk assets more attractive over time, but the announcement itself can signal concern about slowing growth, spooking short-term traders. A 2024 study of 20 rate-cut cycles found that equity markets declined in the first month after half of those decisions (Brave New Coin). Bitcoin’s behavior is similar: it plunged nearly 39 % in March 2020 immediately after an emergency cut, only to rally for months once fresh liquidity reached the system (CoinLedger).

Decoding the technical set-up

• Key support ($115 K): Also called a “demand zone,” this is where historical volume was heaviest. Losing it signals that sellers currently out-gun buyers.

• Next demand zone ($105 K): A price area with previous consolidation—often where sidelined capital waits to re-enter. 

  
  

• On-chain cost basis: The average price at which existing coins last moved; breaching it often accelerates panic selling.

• Leverage flush risk: Futures funding rates flipped negative after the Fed meeting, suggesting over-leveraged longs are exiting—volatility tends to spike during such unwinds (Cointelegraph).

Macro winds: dollar weakness vs. recession risk

A lower policy rate typically pressures the U.S. dollar, historically a tailwind for hard assets like BTC. Yet multiple Fed officials hinted that further cuts depend on sticky inflation data, raising the specter of a stagflationary backdrop in which both growth and real wages stall (Forbes). In that scenario, even abundant liquidity may not offset broader risk aversion, leaving Bitcoin range-bound or drifting lower until macro clarity returns.

What to watch next

• Support reclaim: A decisive weekly close back above $115 K would invalidate the bearish thesis and reopen a path to $124 K–$125 K resistance.

• Spot ETF flows: U.S.-listed Bitcoin ETFs have absorbed billions in 2025; renewed inflows would indicate institutions view sub-$115 K prices as value.

• Funding and open interest: If negative funding persists while open interest drops, the market is de-leveraging—a prerequisite for a healthier upside attempt.

• Fed rhetoric: A more dovish tone in October could flip sentiment quickly; conversely, hawkish talk of “one-and-done” cuts may deepen the drawdown, validating the $105 K retest narrative.

Key terms—quick primer

• Federal Funds Rate: The overnight lending rate U.S. banks charge each other; sets the baseline for global dollar liquidity.

• On-chain metrics: Data recorded on Bitcoin’s blockchain (e.g., cost basis, active addresses) that help gauge investor behavior without relying on exchange reports.

• Support/Resistance: Price levels where buying or selling historically intensifies, often visualized via volume-profile or horizontal lines on a chart.

• Leverage liquidation: Forced closure of margin positions when collateral falls below maintenance thresholds, sometimes triggering cascading price moves.

Bottom line

Bitcoin’s slip below $115 K, triggered by the Fed’s rate-cut announcement, places the spotlight on $105 K as the next high-stakes battleground for bulls and bears. While history shows that sustained low rates can ignite powerful crypto rallies, markets often stumble first as they digest the macro signal. Traders and long-term holders alike should watch support-reclaim attempts, ETF flows, and evolving Fed language to gauge whether this dip is merely a liquidity shake-out—or the start of a deeper correction in the crypto cycle.