September Rate Cut Looms – Here’s How Bitcoin Could Explode

Federal Reserve teases September rate cut—crypto markets hold their breath.

Bitcoin's Next Big Move

Lower rates typically weaken the dollar, sending investors scrambling for inflation hedges. Bitcoin's fixed supply makes it a prime candidate for capital flight from traditional markets. The last Fed pivot triggered a 150% BTC rally—history might just repeat itself.

Institutional Floodgates

Rate cuts could unleash a wave of institutional money. Asset managers sitting on cash reserves suddenly face diminished bond yields. Where do they turn? Bitcoin ETFs offer liquid exposure without the regulatory headache of direct custody—Wall Street's backdoor into crypto.

The Liquidity Tsunami

Cheap money fuels risk appetite. Retail traders leverage up, altcoins pump, and Bitcoin becomes the base camp for entire crypto rallies. Remember 2020? Near-zero rates helped kickstart the last bull run. This time, the infrastructure's better—exchanges, derivatives, and custody solutions all matured.

Watch the Dollar

DXY weakness often correlates with Bitcoin strength. A rate cut accelerates capital rotation out of dollar-denominated assets. Bitcoin operates 24/7 globally—it doesn't wait for NYSE opening bells or Fed announcements.

Of course, traditional finance pundits will call it speculation while ignoring that their own monetary policy devalues currencies faster than crypto volatility ever could. Bitcoin doesn't need permission to be the hedge—it just works.

Key Takeaways

The PPI report on the 10th of September defied Wall Street expectations, which strengthens the chances of a Fed rate cut in September and implies short-term volatility for Bitcoin.

The U.S. annual Producer Price Index (PPI) came in at 2.6% for August, lower than the expected 3.3%.

The Core PPI was 2.8% on a yearly basis, missing the analysts’ expectation of 3.5%, reported the U.S. Bureau of Labor Statistics (BLS).

This release marked the third time in 2025 that the PPI has pointed toward outright deflation. The lower CORE reading than expected, after coming in at 3.7% for July, was also a positive sign.

It pointed toward a Fed rate cut in September.

The CME FedWatch tool indicated a 91.1% probability of a 25-basis-point rate cut and an 8.9% probability of a 50-basis-point cut.

The likelihood of a bigger rate cut increased from 7% after the data was reported on the 10th of September.

Impact of rate cuts on Bitcoin

The background for Bitcoin [BTC] had a strongly bullish tinge. The U.S. Congress has instructed the Department of the Treasury to report on the feasibility of establishing a strategic Bitcoin reserve.

This was bullish in the long-term, but BTC also exhibited short-term weakness.

Speaking to AMBCrypto, Farzam Ehsani, Co-founder and CEO of VALR, commented on Bitcoin’s price growth, with a cautiously bullish leaning.

“For now, traders remain on edge with the upcoming CPI, PPI data print, and the Fed’s September rate decision and policy direction coming into focus.”

He added,

“If the “sell the news” dynamics dominate around the rate cuts, BTC could see another strong shakeout before market conviction returns decisively.”

Source: CryptoQuant

There was reason to be bullish, especially with upcoming rate cuts.

In a post on CryptoQuant Insights, XWIN Research Japan showcased how bitcoin and some key metrics have historically reacted to easing interest rates.

In March 2020, the Fed had slashed rates to NEAR zero in response to the pandemic. This saw the MVRV fall to 1 before rebounding after the liquidity injections that came after March.

The easing cycle in late 2024 saw the MVRV hover near 2, showing the market had room to expand without overheating. At the time of writing, the MVRV ratio was at 2.14.

Source: CryptoQuant

The exchange whale ratio tends to spike right after the announcement of the rate cuts, indicating short-term selling. In the following weeks and months, the whale ratio dropped off both in 2020 and 2024.

Hence, Bitcoin traders and investors can expect short-term turbulence, which WOULD set the stage for a long-term rally.