The Fed’s Big Cut: Risk Assets Smell Blood, Bitcoin Sniffs Euphoria

The U.S. Federal Reserve is about to kick off its first interest rate cut of 2025, and markets are already pricing in the fireworks. Wednesday’s FOMC meeting is expected to deliver a 0.25% trim, though CME Group’s FedWatch Tool is hinting at a non-trivial chance of something juicier — a half-point slash.

For context: cutting rates while stocks are flirting with all-time highs is not the norm. As The Kobeissi Letter notes, it’s only happened three times since 1996. Usually, the Fed waits for the sky to fall before bringing out the rate-cut chainsaw. But this time is different — inflation is still running hot, unemployment is wobbling, and Wall Street’s risk appetite is off the charts.

That’s the paradox: the Fed is about to pump liquidity while asset prices are already stretched. Risk-on traders are salivating.

“There will be more immediate-term volatility, but long-term asset owners will party,” Kobeissi posted on X. “Cuts are coming into rising inflation and the AI Revolution — only adding fuel to the fire.”

Gold and Bitcoin apparently got the memo early. Both have been ripping higher, as if front-running the Fed’s pivot.

Bitcoin is sitting around $115,000 gathering strength for its next move, Source: BNC

The Fed’s Tightrope: Labor Pain vs Inflation Flame

The central bank is juggling an ugly mix — sticky inflation data on one hand, a softening labor market on the other. 

Job data revisions have turned south, and policymakers appear more worried about protecting employment than crushing inflation. In other words: Jerome Powell is about to put growth over price stability, whether he admits it or not.

This is why many analysts argue the “rate-cut cycle” of 2025 will start with financial conditions already loose, markets already exuberant, and the stock market flashing optimism. Translation: if the Fed wanted to prick bubbles, they missed their chance.

Bitcoin’s Bullish Math: Tops, Targets, and $140K Whispers

Meanwhile, the crypto crowd is focused on one question: how high can Bitcoin fly in this liquidity party?

Some argue the current cycle top could stall at $124,500, while others are positioning for a final parabolic blow-off into true price discovery. Other models have gone even bolder: September’s golden cross on the MACD suggested $160,000 isn’t out of the question. Historical rhymes are painting October as the earliest realistic timeframe for a cycle peak, but most likely later.

Dave the Wave says Bitcoin is setting up for fireworks in the 4th quarter, Source: X

Binance’s Scarcity Signal: Whales at Work?

Onchain sleuths are spotting unusual activity. CryptoQuant’s “Scarcity Index” on Binance spiked over the weekend, suggesting an aggressive buyer vacuumed up coins.

Arab Chain, a contributor, explained:

“The index jumps when immediate buying power exceeds available supply, as if buyers are racing to acquire Bitcoin.”

We’ve seen this pattern before. Last June, similar moves preceded a surge to $124K. The caveat: short-term spikes can fizzle unless they persist. The index read 2.94 on Sunday — not yet mania levels, but elevated.

ETFs vs Miners: Institutions Swallow the Supply

The real structural driver, though, is Wall Street’s Bitcoin ETFs. U.S. spot funds sucked in $2.3 billion last week alone, with a single day (Sept. 10) seeing 5,900 BTC inflows — the biggest since mid-July.

Bitwise’s Andre Dragosch crunched the math: ETF inflows last week were almost nine times the number of new coins mined. If miners are the faucet, institutions are the Hoover vacuum.

Material Indicators’ Keith Alan put it simply:

“There is simply too much institutional demand, and that demand is growing.”

That imbalance is what ultimately forces Bitcoin higher. Forget retail FOMO for now — the new whales wear suits.

Liquidity Begets Mania

The Fed is cutting rates into rising inflation, a bubbly stock market, and a frothy crypto cycle. Risk assets like Bitcoin and gold are already pricing this in. And if ETF demand continues to dwarf miner supply, then yes, a higher BTC is on the table this cycle. Maybe $140K, maybe $160K — either way, the top looks closer than people think.

If Kobeissi’s right, long-term holders will party. The question is: when the music stops, how brutal will the hangover be?