Fed Cuts Rates for First Time in 10 Months, Bitcoin Traders Eye Upside Potential
The Federal Reserve lowered its benchmark federal funds rate range by 25 basis points to 4.00%–4.25% on Wednesday, marking its first rate cut since December 2022. The move, widely anticipated by markets, was described by Fed Chair Jerome Powell as a “risk management cut,” aimed at addressing growing signs of economic weakness.
After maintaining a “wait-and-see” stance for ten months, the central bank shifted back into easing mode. Powell emphasized that while the U.S. economy has slowed, there was little support within the Federal Open Market Committee (FOMC) for a deeper cut at this stage. He noted that moderating growth in the first half of the year and a cooling job market—linked in part to shifts in immigration—helped justify the decision.
Recent labor data highlighted the slowdown: the August jobs report showed only 22,000 new positions added, while the unemployment rate climbed to 4.3%, the highest since 2021. Revisions to earlier months also revealed weaker job creation than initially reported.
Chris Rhine, Head of Liquid Active Strategies at Galaxy, said the cut reflects mounting pressure on the Fed to adopt a more dovish stance:
“Risk assets had largely priced in this move, but the updated dot plot suggests another 50 basis points of easing ahead. Any successor to Powell is likely to lean even further toward faster and deeper cuts.”
Powell pushed back on political pressure from President Trump, who has repeatedly criticized the Fed for being too slow to act, stressing that the central bank remains “strongly committed” to its independence.
Markets React
In the minutes after the decision, Bitcoin briefly rallied about 1% to $115,797 before retreating and trading lower around $115,092, down roughly 1.5% on the day. U.S. equities, which had been setting record highs in recent weeks, also jumped initially before reversing sharply. Gold mirrored the same pattern.
Matt Mena, Crypto Research Strategist at 21Shares, said the dovish tilt in the dot plot is more significant for Bitcoin than the cut itself:
“The Fed signaled it’s willing to accelerate easing if needed. That repricing risk creates an asymmetric setup for Bitcoin. While today’s cut was the spark, it’s the implied path that could drive Bitcoin toward new highs into year-end.”
What’s Next
The Fed’s updated projections revealed a split outlook: a narrow majority of FOMC members expect two additional cuts before year-end, while others favor holding steady.
With labor markets softening and political scrutiny intensifying, markets now see a clearer path to more aggressive easing — a dynamic that could prove pivotal for both traditional assets and Bitcoin in the months ahead.
