Fed cuts rates by 25 bps, ends QT by December — Crypto eyes dovish turn

Key Takeaways 

What did the Federal Reserve announce?

The Fed cut interest rates by 25 basis points to a target range of 3.75%–4.00%, marking its first reduction since 2023.

How could this affect crypto markets?

Lower rates and the end of QT could boost liquidity, which has historically been a tailwind for risk assets like Bitcoin.

The U.S. Federal Reserve cut interest rates by 25 basis points on Wednesday, setting a new target range of 3.75% to 4.00%. It’s the first rate reduction since 2023 and signals a clear pivot toward monetary easing.

In the same announcement, the Fed confirmed it will end quantitative tightening (QT) by 1 December, effectively halting its long-running balance sheet reduction program. 

This move marks a sharp shift from the central bank’s prior focus on curbing inflation through tighter liquidity.

According to the FOMC statement, policymakers acted in response to slowing inflation, softening labor conditions, and rising downside risks to employment. 

While officials noted that inflation remains above the 2% target, they stated that the “balance of risks” has now shifted in favor of supporting growth rather than restraining demand.

Markets react cautiously

The rate cut immediately drew attention from crypto traders, who often view Fed policy as a key driver of liquidity across digital assets. 

Bitcoin [BTC] held steady above $110,500 after the announcement, while Ethereum [ETH] hovered around $4,000. 

Market participants are now watching Fed Chair Jerome Powell’s press conference for further clues about whether this is the start of a longer easing cycle.

The Crypto Fear and Greed Index dropped to 39 (“Fear”), reflecting a more cautious market mood compared to last week’s neutral reading. 

Source: CoinMarketCap

This suggests that investors remain wary despite the policy shift, waiting for stronger confirmation of a sustained dovish approach.

Powell tempers expectations for further cuts

During his post-meeting press conference, Fed Chair Jerome Powell stressed that Wednesday’s 25 bps rate cut is “not a preset course” toward continued easing. He said the move reflects a balanced approach as risks to employment rise and inflation stays “somewhat elevated.”

Powell also confirmed that the Fed will end quantitative tightening by 1 December after signs of tightening liquidity in money markets. 

Repo rates have climbed relative to policy benchmarks — a signal the Fed has drained enough reserves.

The remarks suggest the Fed aims to stabilize liquidity, not launch a full easing cycle, leaving traders cautious but optimistic about a dovish shift ahead.

Why it matters

A lower interest rate environment and the end of QT could inject fresh liquidity into global markets. 

Historically, such conditions have supported risk assets like Bitcoin, which tend to perform well when capital becomes cheaper and more abundant. 

A potential revival in ETF inflows and stablecoin demand is expected, as investors rebalance portfolios around a softer Fed stance.

However, the Fed’s reference to “elevated uncertainty” signals that volatility may persist. If Powell emphasizes caution during his remarks, markets could swing sharply before stabilizing.

For now, traders appear to be positioning for a gradual return to liquidity-driven growth—one that could reignite risk appetite across crypto if the Fed confirms this dovish shift in tone.