The cryptocurrency market is experiencing significant downward pressure, with major assets like Bitcoin (BTC) and Ethereum (ETH) facing substantial sell-offs, even as positive macroeconomic developments unfold. Despite recent Federal Reserve interest rate cuts aimed at stimulating economic growth and encouraging risk-on investments, crypto prices continue to bleed. Adding to the puzzle, progress in US-China trade negotiations, which could ease global trade tensions and boost market sentiment, has failed to provide the expected lift to digital assets. This disconnect raises critical questions for traders: Why are crypto markets not responding positively, and what underlying factors might be at play?

Analyzing the Impact of Fed Policies on Crypto Trading

At the heart of this market anomaly is the Federal Open Market Committee's (FOMC) recent decisions under Chair Jerome Powell. The FOMC appears divided on the pace and extent of rate cuts, creating uncertainty that ripples through financial markets. Traders monitoring BTC/USD pairs on major exchanges have noted increased volatility, with Bitcoin dipping below key support levels around $60,000 in recent sessions. According to reports from financial analysts, the end of quantitative tightening (QT) – the process of reducing the Fed's balance sheet – might be contributing to a liquidity gap. This gap could be starving risk assets like cryptocurrencies of the capital inflows they typically enjoy during easing cycles. For instance, trading volumes for ETH/USDT have shown a 15% decline over the past 24 hours as of October 31, 2025, signaling reduced buyer interest despite lower borrowing costs.

In a broader context, institutional flows into crypto remain subdued. Data from on-chain metrics platforms indicate that whale activity – large holders moving BTC – has leaned towards selling, with net outflows from exchanges exceeding inflows by 20% in the last week. This suggests that even with Fed rate cuts potentially lowering yields on traditional assets, investors are not pivoting to crypto as aggressively as in previous bull runs. Resistance levels for Bitcoin are currently holding at $62,000, but a break below $58,000 could trigger further liquidations, offering short-term trading opportunities for bearish positions.

US-China Trade Deal Progress and Its Crypto Market Correlations

Progress in US-China trade talks, including potential tariff reductions, should theoretically benefit global markets, including cryptocurrencies tied to tech and supply chain innovations like Solana (SOL) and Chainlink (LINK). However, the crypto sector's response has been muted, with SOL/USD pairs dropping 8% amid the news. Market indicators such as the Relative Strength Index (RSI) for major altcoins are hovering in oversold territory, around 30-35, hinting at potential reversal points for savvy traders. Yet, the lingering effects of a divided FOMC and QT wind-down may be creating a vacuum where liquidity is redirected to safer havens like US Treasuries rather than volatile assets.

For traders, this environment underscores the importance of monitoring cross-market correlations. Stock indices like the S&P 500 have shown mild gains from trade deal optimism, but crypto's decoupling suggests sector-specific pressures, such as regulatory uncertainties or profit-taking after recent rallies. On-chain data reveals a spike in transaction volumes for stablecoins like USDT, up 25% in the past day, indicating capital flight to safety. Long-term, if liquidity gaps persist, we could see BTC testing lower supports at $55,000, while positive resolutions in trade talks might catalyze a rebound towards $65,000. Traders should watch for FOMC meeting minutes for clues on future policy, using tools like moving averages to identify entry points. Overall, this scenario highlights trading risks in a macro-driven market, where external positives don't always translate to crypto gains, emphasizing the need for diversified strategies and real-time sentiment analysis.