Noah Carter
On 17 September 2025, the Federal Reserve (Fed) reduced its federal funds target by 25 basis points, lowering the range to 4.00%–4.25%. Simultaneously, the Fed signalled the possibility of at least two further quarter-point cuts by year-end. In response, the cryptocurrency market saw muted gains: Bitcoin hovered near US$116,000, Ethereum around US$4,500.
Background Context
The Fed’s move marks its first rate cut since December 2024.It comes amid signs of labour-market softness (job gains revised downward) and inflation still above target at ~2.9%. Markets had already priced in about a 90%+ probability of a 25 bp cut ahead of the meeting. For high-beta assets like cryptocurrencies, the logic is clear: lower interest rates → cheaper funding → higher risk-asset flows. But the nuance: a cut driven by economic weakness can spook risk appetite too.
Why This News Matters
This decision matters for the crypto market—and more broadly—for several reasons:
- Liquidity and funding conditions: A rate cut generally reduces the cost of wholesale and margin funding, which has a direct hand in speculative crypto positioning.
- Dollar influence and risk assets: With the U.S. dollar under pressure, dollar-priced digital assets often benefit from weaker greenback conditions. The Fed’s move signalled a pivot away from the most hawkish regime of recent years.
- “Sell-the-news” risk: As major players at JPMorgan Chase & Co. note, when markets expect a cut, delivering it may not spur as much upside—and could trigger a pull-back if underlying economic themes dominate.
- Cross-asset transmission: Crypto doesn’t trade in isolation. The Fed’s signal affects equities, bonds, FX, which means crypto participants must stay attuned to macro-sentiment, not just chain data.
In short: for retail and institutional crypto traders, this Fed move is a turning point—not necessarily for an immediate breakout, but for a change in regime. The tricky part: what the Fed does next, and how markets interpret it, may matter more than the cut itself.
Our Expert Take
From a trading-desk vantage, here are key take-aways:
• The immediate move may have been priced in
Bitcoin and Ethereum’s tepid reaction (flat to slightly positive) suggests the market had already baked in the cut. That means future surprise—either via stronger cuts or hawkish language—could be more impactful.
• Watch the communication, not just the number
It’s clear that traders are listening less to the size of the cut and more to the dot-plot, forward guidance and commentary. If the Fed signals that this was a one-off, crypto may stall. But if it signals multiple cuts ahead, risk-assets could break higher.
• Risk-on rotation is alive—but fragile
Lower rates set the backdrop for risk-assets to outperform, but only if growth isn’t weakening too quickly. If the cut is viewed as reactive to recession risks rather than proactive, crypto could under-perform.
• Positioning and leverage matter
High leverage in the crypto space means reaction to the Fed will likely be amplified. Short-term traders should monitor funding rates, open interest and liquidation clusters. Spot investors should consider hedging via stablecoins or moving into stronger large-cap tokens (Bitcoin, Ethereum) as first step.
• Scenario outlook
- Base case: Two more cuts by year-end → moderate rally in crypto (BTC to US$130k–140k); altcoins follow later.
- Bear case: Fed signals caution → delayed cuts → dollar strengthens → crypto struggles, possible pull-back of 5-10%.
- Bull case: Fed accelerates cuts and balance sheet reduction pauses → liquidity surge → breakout in crypto to new highs.
In conclusion: For traders covering crypto CFDs, FX desks and derivative setups, the key is not just that rates were cut, but what happens next. Positioning around the Fed’s next guidance round (dot-plot, monetary projections) may offer the most actionable insight.
