Santiment Breaks Down The Trap

Crypto markets lurched lower after the Federal Reserve delivered exactly what everyone said they wanted: the third straight 25bps cut to close out 2025. Santiment’s latest deep dive makes a simple, slightly uncomfortable point: retail treated it as a green light, whales treated it as exit liquidity.

Bitcoin shortly rallied to $94,044, Ether surged to $3,433, XRP hit $2.10 and Solana managed to reach $142, but the momentum was short-lived. The BTC price fell by more than 5% at one point, ETH even fell by more than 8.5%.

What Caused The Crypto Market Plunge?

On 11 December, the FOMC confirmed another quarter-point reduction, completing what Santiment calls the “trifecta of cuts at the end of 2025.” Lower rates mean cheaper borrowing, more risk-taking, and—on paper—a friendlier backdrop for crypto. The Fed still describes an economy growing at a “moderate” pace with inflation above target, and in both the October and December meetings it cut because “the balance of risks (like slowing job growth) supported easing policy.”

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The key shift is liquidity. On 29 October, the Fed decided to slow the reduction of its securities holdings from 1 December, easing the pace of balance-sheet runoff. By 10 December, it went further, saying bank reserves had fallen “too much” and announcing renewed purchases of short-term Treasury bills to keep reserves “ample.” That is a move from shrinking the balance sheet to quietly adding money back into the system. As Santiment notes, the Fed is still data-dependent but clearly more willing to lean dovish to protect financial conditions.

Markets, however, front-ran the story. Prediction platform Polymarket showed an “overwhelming amount of optimism” in the hours before Jerome Powell spoke. At the same time, on-chain data flagged abnormal activity: @DeFiTracer spotted a whale selling roughly 100 million dollars’ worth of Bitcoin within an hour, triggering “a healthy mix of sensationalized panic.” The expected outcome—another cut—arrived, but positioning around it was anything but balanced.

Bitcoin’s price reaction looked bullish at first. BTC spiked to about $94,044 after the announcement. Yet Santiment’s social data shows that the positive-versus-negative commentary ratio for Bitcoin had already peaked well before Powell’s remarks. The crowd’s emotional high came in anticipation; when the actual rally hit, traders were “quite modestly reactive” despite the move to 94K. Sentiment was spent.

Ethereum was worse. Over the same 24-hour window, ETH surged to around $3,433, and the positive comment ratio “was a LOT more interesting.” Santiment describes “a lot of FOMO after a mini surge immediately after Powell spoke,” with many traders who bought the breakout “eventually [getting] burned when ETH fell back down to 3,170.” It is the textbook “buy the rumor, sell the news” pattern: bullish macro headline, short-term bearish price action, retail buying the spike while larger holders “gladly” offload into the mini-rally.

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Structurally, though, the report is not outright bearish. Year-to-date, Santiment notes, Bitcoin is down about 3.6%, versus a 17.6% gain for the S&P 500 and a striking 61.1% for gold. “It’s quite the dramatic difference,” the team writes, arguing that “a regression to the mean for BTC would be justified.”

With three cuts now locked in and reserves being topped up via T-bill purchases, the “catch-up” case for crypto versus equities and metals “becomes even stronger.” Historically, crypto “has reacted later than equities or commodities when macro trends shift.”

On-chain, so-called smart money appears to be acting as if that delayed reaction is coming. Wallets holding 10–10,000 BTC have added 42,565 Bitcoin since 30 November. What is “still [remaining],” Santiment says, is “a notable dump from retail, which would be indicative of the perfect recipe for a major bull run.” For now, they expect smaller traders to “run on fumes from this positive news of rates getting cut, for at least a couple of days.”

The bottom line of the report is deliberately sober. The final FOMC decision of 2025 “reinforces a narrative of gradual easing, improving liquidity, and a cautiously supportive environment for risk assets.”

After a rough year, “ending the year with three consecutive rate cuts from the Fed is a strong sign.” If inflation drifts toward target and economic data stays stable, Santiment argues, 2026 could finally give digital assets “the breathing room they’ve been waiting for.” Just do not confuse that with an invitation to chase the first post-Fed spike—because, as this week just reminded everyone, that is still where crypto tourists go to get burned.

At press time, the total crypto market cap was at $3.04 trillion.

Featured image created with DALL.E, chart from TradingView.com