The Federal Reserve’s widely anticipated decision came on Wednesday, September 17. The Federal Open Market Committee cut interest rates for the first time in 2025, lowering the federal funds target rate by 25 basis points, from a range of 4.25%-4.50% to 4.00%-4.25%.
The Fed said it would maintain flexibility for future policy, leaving the door open to more reductions if needed. However, Chair Jerome Powell declined to commit to a clear path of easing.
Powell stressed rising worries about jobs and economic growth, which showed a cautious change in tone. Bloomberg reported that one member of the FOMC dissented, calling for a larger 50-basis-point cut. That dissenter is believed to be Governor Stephen Miran, a recent Trump appointee.
What the Fed decision means for crypto assets
Lower interest rates typically reduce government bond yields while lowering borrowing costs for investors. This tends to increase appetite for risk assets, including equities, Bitcoin and altcoins.
Because markets had fully priced in the move, immediate price effects are expected to be modest. Still, Powell’s signal of a softer stance on growth and inflation could support higher Bitcoin prices and potentially lead to stronger moves in altcoins.
Shawn Young, chief analyst at cryptocurrency exchange MEXC, said the stakes are higher now than in past meetings.
“With inflation still elevated, markets will closely track the direction the Fed takes,” he said.
Farzam Ehsani, CEO of VALR, added that institutional liquidity remains the biggest factor for Bitcoin’s trajectory, even if macro pressures persist.
In a bullish scenario, experts note that additional rate cuts could help push Bitcoin toward the $120,000–$125,000 range in the coming weeks, while altcoins could see renewed flows if liquidity expands.
Altcoin dynamics and potential rotation
Arthur Azizov, founder of B2 Ventures, said the Fed decision might boost both Bitcoin and altcoins, but also carries risk of a “sell the news” reaction if traders view the decision as insufficiently dovish.
“Altcoins are more sensitive to liquidity shifts,” he said. “Solana, which has risen above $230, faces strong resistance near $240–$250, while XRP is defending the $2.90–$3.00 level. Unless new inflows arrive, traders often rotate back into Bitcoin during uncertain periods.”
Market and political backdrop
Powell noted that tariffs introduced by President Trump are raising some domestic prices, though he stressed that the longer-term effects on growth remain uncertain. He also highlighted risks from a slowing labor market, where both demand and supply of workers have weakened.
Behind the scenes, the Fed faces challenges with governance. In August, Biden-appointed Governor Adriana Kugler abruptly resigned, while Trump has clashed with Democratic-appointed officials, including attempts to remove Governor Lisa Cook - blocked by the courts. Miran, confirmed to replace Kugler, voted for a larger 50-basis-point cut.
The broader FOMC, however, supported the 25-point reduction by a wide majority, with 11-1 in favor. New projections indicated that most members expect two further cuts by year-end, although there is significant uncertainty around the economic outlook.
Risk analysis: what could go wrong?
While markets welcomed the Fed’s move, analysts caution that risks remain:
- Inflation persistence: If Trump’s tariffs and other pressures lead to higher inflation, further easing could risk fueling price instability.
- Liquidity risks: Sharp outflows from money market funds into risk assets could destabilize funding markets.
- Policy uncertainty: Political battles over the Fed’s independence could affect confidence in monetary policy.
- Crypto-specific risks: A rally driven by liquidity rather than adoption leaves altcoins exposed to sharp reversals.
Outlook
At his press conference, Powell stressed that policy is not on a pre-set course. “We are attentive to risks in both directions,” he said, describing the cut as “risk management” aimed at balancing weak labor data with persistent inflation.
Crypto markets are watching closely. Matt Mena, research strategist at 21Shares, noted that as much as $7.5 trillion remains parked in money market funds.
“As yields fall, some of this capital could flow back into equities and crypto,” he said.
Mena predicted that Bitcoin could rally into Q4, potentially exceeding its previous all-time high near $124,000. Prediction platform Polymarket shows around 62% of traders expecting BTC above $130,000 in 2025.
Still, much depends on whether the Fed follows through with additional cuts and whether inflation stays under control.
Oleksii Shumak
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