Bitcoin
|4 min ReadFed Keeps Cutting Rates, Yet Crypto Keeps Falling
Jax Morales
Senior Analyst
Published
Jan 16, 2026
The Federal Reserve keeps cutting rates, pumping liquidity into the system, but the crypto market still can’t catch a break. Investors are wondering how an era of cheap money turned into a brutal, grinding downtrend.
In theory, lower interest rates should lift all risk assets. But right now, the flood of new token issuances and massive unlocks is crushing the buying power brought by modest liquidity injections. The result: total crypto market capitalization is growing, but most coins are down. It feels like a bear market, even as the charts say expansion.
Data from TradingView shows that crypto market cap and the S&P 500 still move in rhythm. Over the past year, both have swung together, bottomed together, and restarted together. Yet since the October 11 black swan event in crypto, the pattern broke — prices slid even as equities rebounded.
Meanwhile, the total supply of new tokens exploded. According to Tokenmist, roughly $30 billion worth of tokens were unlocked in the past three months, flooding the market. Many projects from the 2021–2023 cycle — public chains, DeFi, AI tokens — all hit major unlock phases.
The math is simple: mild rate cuts can’t offset the nonstop sell pressure from token unlocks. The overall market cap may rise, but individual prices sag. Traders feel like they’re in a bear market — because for them, it is.
Macro Winds Turn Against Risk Assets
Yes, the long-term setup still leans toward easing. But short-term, it’s a liquidity squeeze. The U.S. government shutdown froze spending, while the Treasury General Account (TGA) ballooned as funds piled up unused. That’s liquidity pulled out of the system.
By late October, the TGA balance reached 274 billion in short-term debt.
On the monetary side, the Fed’s rate cuts are too slow for markets hungry for more. Real rates remain high. Chair Jerome Powell even refused to commit to another cut in December’s FOMC meeting, denting confidence further. Preemptive cuts signal caution — and fear of a deeper slowdown.
Then there’s geopolitics. U.S.–China tension is flaring again, from rare earth export limits to renewed tariffs. Global investors are turning cautious. The dollar index and VIX are both climbing — a clear sign of rising risk aversion.
Stocks in the U.S., China, and Korea Are Sucking the Air Out of Crypto
In 2021, liquidity had nowhere else to go. COVID crushed earnings, and stock valuations looked shaky. The crypto market became the wild playground for excess cash, sending total market cap from 3 trillion in one year.
This time, equities are booming. U.S. markets keep setting new highs on AI optimism. China’s A-shares, buoyed by policy and liquidity hopes, broke above 4,000 points. Korea’s KOSPI index surged nearly 70 percent this year, driven by semiconductor exports — the best performance among major indexes in 2025.
That’s where the money is flowing. High-risk capital is chasing higher-certainty assets. Stocks now offer growth, safety, and liquidity — leaving crypto on the sidelines.
Unless global stocks cool off or the Fed steps up liquidity injections, crypto could stay marginalized. Total market cap may keep expanding, but price action will stay weak. The key dates to watch: the U.S. government’s reopening and the Fed’s balance sheet reduction ending on December 1. Those could bring a breath of fresh liquidity back to this tired market.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.