The U.S. Federal Reserve delivered its first rate cut of 2025 on Wednesday, trimming the federal funds rate by 25 basis points to 4.00%–4.25%. The move, widely priced in by markets, left Bitcoin largely unchanged near $117,000.
Fed’s cautious stance
Chair Jerome Powell portrayed the cut as a “risk management measure,” framed between slowing labor data and persistent inflation. “Risks to inflation are tilted upward, while risks to employment lean downward,” Powell said, adding tariffs have already increased prices in some categories.
The Fed’s updated projections suggest rates could fall to 3.6% by year-end, requiring either one large cut or multiple smaller moves at its remaining two meetings. Additional declines are expected through 2026 and 2027.
Bitcoin price holds ground
Bitcoin traded flat after the announcement, briefly fluctuating near $116,600 according to CoinGecko. The muted reaction came as investors had largely priced in the 25 bps move.
Equity indices also dipped, with the S&P 500 and Nasdaq closing lower, while both crypto and stocks had rallied ahead of the meeting.
Expert reaction
- Ira Auerbach, former head of Nasdaq digital assets and now at Offchain Labs, said the cut signals a data-dependent trajectory:
“Easier financial conditions should support the crypto ecosystem into next year.”
- Gerry O’Shea, head of research at Hashdex, highlighted the “muted” response but pointed to record ETF inflows as a bullish driver:
“Demand for corporate reserves and ETFs will help Bitcoin push higher if confidence in more cuts builds.”
- Stephane Ouellette, CEO of FRNT Financial, described the U.S. as entering “a currency-depreciation cycle unseen since 2021,” positioning Bitcoin as a hedge against weakening fiat.
- Popular pundit Ash Crypto forecast a short-term downside to $100,000 in a “sell-the-news” dip but argued for an eventual rebound toward $150,000, echoing Wall Street concerns from JPMorgan and RBC of a broader “buyer fatigue” pullback.
MY PREDICTION FOR TODAY'S FOMC
— Ash Crypto (@Ashcryptoreal) September 17, 2025
- If the FED cuts rates by 25 bps, markets will dump after the event because 25 is already priced in. (The market will pump hard if we get a 50 bps cut because that’s the bullish surprise everyone wants. )
- This becomes “sell the news” and US…
Original analysis: Why Fed cuts matter for Bitcoin
Rate cuts often weaken the U.S. dollar and reduce yields on safe assets like Treasuries. This improves the appeal of non-yielding, risk-on assets like Bitcoin by increasing liquidity and lowering opportunity costs.
The situation mirrors the 2020-21 cycle when ultra-loose monetary policy helped fuel Bitcoin’s surge to record highs. The difference now: inflation risks remain elevated, making it less clear how aggressively the Fed will ease.
ETF demand, corporate balance sheet allocations, and Q4’s tendency for stronger crypto performance (historical average ~80% gains, according to CoinGlass) reinforce the bullish view.
Risks to the outlook
Despite optimism, analysts highlight risks:
- Short-term volatility: Markets could see a pullback as equities digest Fed policy and crypto reacts to overextended positioning.
- Macro uncertainty: Persistently high tariffs could cap Fed easing and even pressure inflation higher.
- Regulatory curveballs: Potential U.S. decisions on altcoin ETFs or further scrutiny of stablecoins may redirect flows.
- Liquidity traps: If inflows stall, leveraged positions could unwind quickly, driving downside moves.
The bottom line
Bitcoin’s muted reaction to the Fed’s September rate cut underscores its maturity as an asset but also highlights that traders had fully priced in the move. Analysts remain confident that easier conditions, alongside ETF demand, could push Bitcoin to new highs into Q4 2025.
The key unknowns: the Fed’s pace of cuts, the persistence of inflation, and whether investors maintain conviction that Bitcoin is a credible hedge in this cycle.
Kristian Koch
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