Dovish Fed Boosts Crypto, but Dollar Strength Could Limit Gains
Major cryptocurrencies, led by Bitcoin, have resumed a steady climb following Wednesday’s Federal Reserve rate cut, though resilience in the U.S. dollar may pose headwinds.
The Fed cut its benchmark rate by 25 basis points to 4% and signaled potential for faster easing over the next 12 months, giving a lift to risk assets.
Bitcoin and Ethereum Lead Market Gains
Bitcoin (BTC) surged past $117,900, the highest since mid-August, breaking out of a sideways range and continuing its recovery from early September lows near $107,200. BTC was up nearly 1% over a 24-hour period at the time of writing.
Ethereum (ETH) gained 2.7%, though it remained confined within a four-week contracting triangle. Other major tokens—including Dogecoin (DOGE), Solana (SOL), and BNB—rose over 4%, while XRP climbed nearly 3%, building momentum after a bullish descending triangle breakout.
Institutional Developments Support Solana and XRP
Solana briefly touched $245, approaching its weekend high, following CME Group’s announcement that it will list SOL options starting October 13, alongside XRP options. These new offerings are expected to increase institutional participation and enable better risk management.
“The Fed’s dovish stance has created an asymmetric setup for Bitcoin,” said Matt Mena, crypto research strategist at 21Shares. “While the 25bps cut sparked the rally, the trajectory implied by the Fed’s dot plot may drive BTC to new highs into year-end. Bitcoin could surpass $124,000 by late October, with Ethereum breaking the $5,000 mark.”
Dollar Strength Could Cap Upside
Despite dovish Fed projections, the Dollar Index (DXY) rebounded to 97.30 from a July low of 96.37. Powell’s caution against rapid successive cuts, along with ongoing quantitative tightening and high inflation, likely underpin the dollar’s resilience. A stronger DXY could tighten financial conditions, potentially limiting gains in BTC and other risk assets.
Tail Risk Pricing Increases
Crypto financial platform BloFin noted that market participants are increasingly hedging against tail risk—rare but high-impact events such as sharp market declines. Short-dated BTC put spreads, designed to profit from price drops, have surged, reflecting concern over downside scenarios.
