Federal Reserve Trims Rates in Strategic Shift, Bitcoin Poised for Possible Gains

Fed Delivers First Rate Cut of 2025 as Bitcoin Traders Weigh the Implications

The Federal Reserve cut its benchmark federal funds rate by 25 basis points on Wednesday, lowering the target range to 4.00%–4.25%. It marks the first reduction in ten months and the lowest level since late 2022. Chair Jerome Powell described the move as a “risk management” step, signaling caution as growth and hiring momentum ease.

Powell said the U.S. economy “moderated” in the first half of the year, with the labor market showing clear signs of cooling—partly due to immigration-driven shifts. Still, he emphasized that most Fed officials opposed a larger cut and remain wary of moving too aggressively.

Labor market weakness has become increasingly evident. The August jobs report showed only 22,000 new positions created, while unemployment rose to 4.3%, its highest reading since 2021. Revisions also indicated hiring had been overstated in previous months.

“Risk assets anticipated this cut, but the Fed’s updated dot plot points to an additional 50 basis points of easing ahead,” said Chris Rhine, Head of Liquid Active Strategies at Galaxy. “Future leadership at the Fed could lean toward faster, deeper cuts.”

Political pressure has intensified as well. President Trump has criticized the central bank for waiting too long to act, though Powell reaffirmed the Fed’s independence, saying it remains “strongly committed” to its mandate.

Markets React
Bitcoin initially jumped 1% to $115,797 after the decision but quickly lost steam, trading down 1.5% near $115,092. U.S. stock benchmarks, which have been repeatedly setting record highs, also reversed gains, while gold mirrored the same pattern.

“The dovish lean in the dot plot matters more than the cut itself,” said Matt Mena, Crypto Research Strategist at 21Shares. “That repricing risk could create an asymmetric setup for Bitcoin, potentially paving the way to challenge new highs into year-end.”

Looking Ahead
The Fed’s dot plot revealed a split committee. A slim majority of policymakers expect two further rate cuts this year, while others prefer to hold steady. Investors are now watching incoming data to gauge whether the Fed will accelerate its easing path in the months ahead.

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