On September 17, the Fed cut its benchmark rate by 25 basis points — the first cut of 2025. The move was widely expected, and bitcoin’s “sell the news” dip to $115,000 proved shallow. The asset quickly resumed its grind higher and now trades near $117,880.
More significant than the cut itself is the Fed’s tone. Policymakers are signaling a clear shift toward supporting a weakening labor market, even as inflation remains elevated. This dovish tilt increases the likelihood of further rate cuts and the continuation of global liquidity expansion — favorable conditions for risk assets.
Crypto markets are already stirring. Total market capitalization has reached a record $4 trillion, and stablecoin deposits — particularly USDT — have surged, indicating that investors are amassing capital for potential buying opportunities.
Dovish Signals from the Fed
The Fed’s decision may have been expected, but it still broke precedent. For the first time in over 30 years, the central bank cut rates with core PCE inflation as high as 2.9%. This underscores how much its decision was driven by the labor market side of its dual mandate — signaling that the job market is simply too weak to ignore, even as inflation lingers.
The vote also exposed a sharp divide inside the Fed. Nine of 19 officials now expect two more cuts in 2025, while six see none — a striking split with only two meetings left this year. Futures markets are less ambivalent: according to the CME FedWatch tool, they price in about an 85% chance of another cut in October and 75% in December.
As The Kobeissi Letter noted, this marks a historic pace of rate reductions despite elevated inflation — a scenario rarely seen before. The Fed’s updated projections reinforce the tension: it expects PCE inflation to remain near 2.6% in 2026 while unemployment stays around 4.3–4.5%, a mix edging toward stagflation.
Asked about the risk of inflating a bubble, Chair Jerome Powell deflected, saying the Fed’s focus remains on inflation and employment, not asset prices. Markets took the hint: with global liquidity now near an all-time high of $185 trillion, expectations of looser policy are strengthening — and assets, including crypto, are poised to benefit.
Traders Ready for Action
Crypto markets reflect this shift. According to CryptoQuant, volatility is at its lowest level since late 2023, when bitcoin traded at $17,000–$25,000 before surging past $100,000. Exchange flows show a similar calm, with investors staying put rather than cashing out.
Bitcoin inflows have dropped to a seven-day average of just 25,000 BTC, down from 51,000 in July, while the average deposit per transaction has halved from 1.14 BTC in mid-July to 0.57 BTC. Ethereum shows the same pattern: ETH inflows are at a two-month low of 783,000 ETH on a seven-day basis, compared with 1.8 million in mid-August, and the average deposit size has slipped from 40–45 ETH to about 30 ETH. This slowdown points to reduced selling pressure from larger holders on both networks.
Meanwhile, the capital needed to power the next rally is quietly accumulating. USDT deposits into exchanges have surged as large investors position themselves for a busy time ahead. Net USDT flows swung from –$273 million on April 6 to +$379 million on August 31 — the highest level of 2025 — while average daily deposits climbed from a low of $63,000 in July to $130,000 today.
Crypto analyst Axel Adler estimates that over the last 36 hours before the Fed meeting, approximately $9 billion in stablecoins flowed into exchanges.
This growing liquidity aligns with a turn in sentiment. In a recent report, Bitwise analysts note that softer U.S. inflation data has markets fully pricing in at least 75 basis points of cumulative cuts by year-end, helping spark “a return to slightly bullish sentiment.” Blockchain analytics firm Santiment echoes this, saying bullish commentary now makes up 64% of crypto-related social media posts — the highest “crowd greed” level since July.
In short, the Fed’s pivot toward growth support — combined with record liquidity, muted selling, and accelerating stablecoin inflows — is priming crypto markets for an eventful autumn.
