Rate Cut Roulette: What 0, 25, or 50 bps Means for Bitcoin and Altcoins

FED'S NEXT MOVE: CRYPTO'S MAKEOVER OR BREAKPOINT?

The Rate Cut Spectrum

Zero cuts signal business as usual—tradFi clings to higher yields while crypto plays the long game. Twenty-five basis points? That's the sweet spot where institutional money finally gets off the sidelines. Fifty? Full throttle risk-on mode—altcoins could explode while Bitcoin smashes previous ATHs.

Bitcoin's Hedge Narrative

Traditional finance frets over basis points while Bitcoin operates on a different calculus entirely. Each cut weakens fiat's grip—digital gold's appeal sharpens as yield curves flatten. Remember: crypto doesn't wait for permission to rally.

Altcoin Amplification

Smaller cuts fuel steady accumulation—smart money builds positions. Larger cuts trigger frenzy—retail FOMO meets leveraged speculation. Either way, alts outperform when liquidity pumps through the system. Just another day watching hedge funds overcomplicate what crypto natives already know.

THE BOTTOM LINE: While economists debate fractions, crypto's already priced in the inevitable—debasement always wins.

The 25 Basis Point Baseline

Most analysts see a quarter-point cut as the base case. Charlie Bilello noted that the Fed Funds Rate is expected to be cut 25 bps this week.

Meanwhile, bond market watchers like Shazi argue the decision is already locked in. Yields are also pricing three such cuts by year-end.

“The 10-Year Note Yield officially drops below 4.00% for the first time since April 4. Markets are now fully pricing in three 25 bps interest rate cuts by year-end,” The Kobeissi Letter added.

Notwithstanding, that certainty may be a double-edged sword, with analysts already forecasting a sell-the-news event.

“There’s probably a 99% chance a rate cut is announced on Wednesday. No one will be surprised by that. This is why it’s often a sell-the-news event. Once we get past that news, Thursday will probably be green, and Friday will probably be some chaos that finishes green,” analysts at IncomeSharks noted.

Meanwhile, Bitcoin’s history with rate cuts shows that excitement often gives way to steep sell-offs.

Accordingly, traders should be cautious about assuming a cut automatically means a rally.

“The last time the Fed cut rates was December 18, 2024. bitcoin was at $106,000 and dumped 30% within weeks,” analyst Quinten observed.

With Bitcoin reclaiming above the $115,000 threshold, traders are wary that a similar dynamic could play out.

Analyst Ted Pillows mapped two bearish near-term scenarios. The first entails a drop toward $104,000 before a reversal, while the second highlights a deeper slide toward $92,000 to fill a CME gap before rallying to fresh highs.

The Fed will cut rates in just 2 days.

JP Morgan and other big analysts are expecting a market dump before reversal.

Scenario 1: $BTC will dump towards $104,000 level before reversal.

Scenario 2: Bitcoin will dump towards $92,000, which also has a CME gap before reversal and a… pic.twitter.com/Pq08pjMABR

The 50 Basis Point Surprise

Still, a larger cut remains possible, if unlikely. According to Gurgavin, Standard Chartered expects a 50-bps move, though Kalshi odds suggest only a 9% chance.

STANDARD CHARTERED SAYS THE FED IS GONNA CUT RATES BY 50 BPS THIS WEEK DUE TO WEAK JOBS REPORT

MEANWHILE ACCORDING TO KALSHI THERE IS ONLY A 9% CHANCE THE FED WILL CUT RATES OVER 25 BPS THIS WEEK pic.twitter.com/v4RiDKQ0MV

Analysts see such a decision as bullish, forecasting + $2.5 trillion in market liquidity that could send altcoins soaring.

Zero Hedge, a popular user on X, noted JPMorgan’s assessment that a 50-bps cut has just a 7.5% probability but could MOVE equities by 1.5% either way.

JPM FOMC odds. Two stand out:

1% chance of a rate hike. This would confirm the Fed was never actually independent but is driven by whoever occupies the WHITE House.

7.5% chance of 50bps rate cut. Market could drop 1.5% or rise 1.5% pic.twitter.com/1c3fR13XvJ

If realized, this more aggressive easing WOULD likely fuel a short-term rally in crypto, breaking the “sell-the-news” cycle by signaling the Fed is willing to provide deeper liquidity.

The Zero-Cut Shock

While no analysts actively call for a hold, the possibility cannot be dismissed. Zero Hedge pointed out that even a hike still carries a nominal probability in market models, highlighting lingering uncertainty.

Should Powell refuse to cut, sentiment could unravel quickly. As traders like Hunts observed, the market is already “on shaky ground,” with politics and tariffs complicating the picture.

“The crypto markets are back on shaky ground. Bitcoin has pulled back from recent highs as traders weigh what the Fed will do next. A 25-bps rate cut at this week’s FOMC meeting looks likely, but President Trump is demanding even deeper cuts to soften the blow from tariffs and a cooling job market,” Hunt explained.

This tug-of-war between politics and policy is adding fresh volatility to Bitcoin and altcoins, with sentiment hanging in the balance.

“…The question now: Will the Fed play it safe, or swing harder?” Hunts posed.

A no-cut outcome would likely trigger a sharp sell-off across risk assets, with Bitcoin particularly exposed.

Beyond the Decision, Tone Matters

Ultimately, much will depend not just on the size of the cut but also on Powell’s guidance. crypto market participants will monitor the Fed chair’s speech for possible clues.  

“It won’t be sell the news if Powell speaks in a dovish manner, which he is extremely likely to do,” Kale Abe argued.

Traders will parse every word for clues on future easing, with September’s seasonal equity selling adding another LAYER of risk, as YAARRR highlighted.

Crypto markets have rallied for months on expectations of easier money.

However, whether September 17 marks the start of a new leg higher or a painful reset hinges on which scenario pans out tomorrow.