Fed’s Rate Cut Fails to Lift Crypto
Crypto markets did not rally on Wednesday, September 17, following the Federal Reserve’s decision to cut benchmark rates for the first time since December. Bitcoin, the world’s largest digital currency by total market value, was trading between $115,000 and $116,000 when the Federal Open Market Committee released a statement at 2 p.m. announcing a reduction in the target range for the federal funds rate to 400 to 425 basis points.
In the following hours, the price of this digital asset fluctuated slightly, dipping below $115,000 before climbing to approximately $117,000 around 7 p.m. Ether, the second-largest cryptocurrency, saw modest volatility, dropping from around $4,600 at the time of the announcement to about $4,430 before rising again to approximately $4,620. Some analysts noted that the 25 bp rate cut had already been factored in by the markets. Julio Moreno, stated “Today, we did not see much volatility as the Fed interest decision had been long anticipated–the market was seeing a 25bps cut with above 90% probability.” Brian Huang, cofounder of fintech firm Glider, stated in an email that “Crypto markets had widely priced-in today’s rate cut, and so BTC and ETH are flat on the day.”
Analysts characterized this rate cut as a favorable development for the markets. “The Fed’s rate cut today is a positive signal that liquidity is back on the table, resulting in a short-term boost in sentiment,” stated Qin En Looi. Moreno shared a comparable viewpoint, noting that “In general, a Fed cut is a positive catalyst for risk assets such as cryptocurrencies and could mark the start of a rally into Q4 as the Fed guidance was for more interest rate cuts this year.” Several analysts highlighted the central bank’s crucial role in the crypto markets moving forward. “When Powell blinks, risk assets breathe, and Bitcoin inhales deeper than most,” said Doug Colkitt. “The sad but inescapable reality is that the market is still addicted to Fed signals, even if crypto was built to escape them,” he added. Thomas Perfumo, provided insights on this situation, presenting a forward outlook. “The Federal Reserve and markets appear aligned on the expected path of rate cuts through late 2025 and into 2026, a backdrop that remains broadly supportive for risk assets, including crypto,” he stated. “Looking forward, market performance hinges on macroeconomic indicators such as employment and inflation data. These will play a central role in determining whether incremental 25bps cuts are sufficient,” Perfumo added.
Greg Magadini, emphasized the importance of the Fed acting of its own free will and accord. “I continue to believe the biggest driver of asset prices, especially Gold and Bitcoin, revolves around the Fed’s independence. This independence remains in question especially going into 2026 when a new Fed Chairman will take over,” he stated. While central bank policy will significantly influence the crypto markets, it is innovation within the space that will drive changes in asset prices. “If the Fed stays on a dovish path, expect more capital rotating into crypto’s higher-beta plays,” he stated. “But let’s be clear – macro is the wind, and crypto innovation is the engine. Rate cuts might kick off the next leg, but real adoption is what keeps it running over time.”
