Fed Slashes Rates 25 BPS - Crypto Markets Erupt

The Federal Reserve just fired the starting gun. Its decision to cut interest rates by 25 basis points sent immediate shockwaves through digital asset markets, proving once again that crypto trades on macro sentiment as much as tech.

The Liquidity Signal

Traders didn't wait for the press conference. The announcement triggered a classic risk-on pivot, with capital flowing out of traditional safe havens and searching for yield. For crypto, a Fed cut isn't just about cheaper borrowing—it's a green light for speculative appetite. Lower rates diminish the appeal of yield-bearing government debt, making zero-yield but high-upside assets like Bitcoin suddenly more competitive. It's the old 'bad news for the dollar, good news for hard assets' playbook, updated for the digital age.

Volatility Is The Feature

Expect the rollercoaster to continue. While the initial reaction was sharply positive, the path forward hinges on the Fed's narrative. Is this a one-off adjustment or the start of a full easing cycle? Every subsequent data point on inflation and employment will now be magnified through a crypto lens, fueling wild swings. This environment favors the agile—algorithmic traders, derivatives desks, and anyone with a high tolerance for whipsaws. Long-term holders might just shrug, but for the markets, volatility is the oxygen.

A Cynical Take on the 'Policy Put'

Let's be real: Wall Street has spent decades conditioned to expect the 'Fed Put'—the implicit promise that central bankers will cushion any major market fall. Now, crypto is pricing in its own version. The violent reaction to a mere 25 BPS move shows how hooked the market has become on loose monetary policy, a dependency that would make any old-school banker scoff. It turns out decentralized finance still watches the central bank's every move—some revolution.

The fuse is lit. Whether this rate cut fuels a sustained rally or just another pump-and-dump spectacle depends on what comes next. One thing's certain: in crypto, the only constant is reaction.

Market reaction to rate cuts 

The global markets reacted immediately to the Fed’s decision, and asset managers started rethinking their strategies by quickly buying and selling assets. The S&P 500 closed 0.8% higher, 10-year Treasury yields dipped to 4.12%, and Bitcoin surged more than 2% within minutes of the 2:00 p.m. ET announcement, briefly topping $93,000 before settling down, as per CoinMarketCap data.

Ethereum and other major altcoins posted gains of 3–6% in the hours that followed.

Crypto traders and analysts interpreted the dovish tilt as rocket fuel for risk assets. Popular crypto accounts celebrated the decision as validation that the Fed is once again providing liquidity that ultimately flows into speculative markets.

“FOMC cuts by 25 bps as expected,” noted Nick Rimiraos of The Wall Street Journal, adding that the “Fed will start ‘reserve management purchases’ this week, beginning at $40 billion per month in T-bills.”

FOMC cuts by 25 bps as expected

Three dissents: Goolsbee and Schmid opposed the cut. Miran wanted a 50 bps cut.

The SEP shows six officials of 19 didn’t favor a cut

The median DOT is unchanged for 2026

The Fed will start “reserve management purchases” this week, beginning at… pic.twitter.com/r2O4KvHtJO

Though not everyone was cheering for rate cuts. Several prominent voices in the community warned that the celebration may be short-lived as a 25 bps cut when unemployment is rising, and fiscal deficits are exploding, isn’t hawkish—”it’s just less bad.” 

By Thursday morning, bitcoin had pared some gains and traded near $94,500 as investors digested Fed Chair Jerome Powell’s press conference remarks that “the economy remains in a good place” and that further cuts will be data-dependent.

The December cut concludes a year in which the Fed slashed rates by a cumulative 100 basis points. Whether crypto’s post-announcement pump marks the start of a new bull leg or simply a relief rally ahead of tighter financial conditions in 2026 remains the market’s biggest open question.

Also read: Singapore Tops 2025 Global Crypto Adoption Rankings: Bybit Report