Fed rate cut expectations continue to make crypto news headlines as the market waits with bated breath to watch its influence on crypto prices unfold.
The Fed instigated more chatter over the matter this week courtesy of Jerome Powell’s statements.
While crypto analysts have been waiting for the next piece of crypto news to trigger another major move, the FED chair revealed that Quantitative tightening is ending.
Powell’s statement was fueled by recent observations such as declining bank reserves and declining FED’s Reserve Repo facility.
The end of quantitative tightening means the FED might be forced to double down on quantitative easing.
This also means the FED’s preference for higher rates for longer may finally pave the way for healthier liquidity flows.
This could favor crypto news as the liquidity landscape shifts in favor of rate cuts. But the big question now is how this will influence the crypto market.
Will There be a FED Rate Cut Before the End of October?
Analysts have been expecting rate cuts since September, with some anticipating at least 3 rate cuts before the end of 2025.
The rising chatter about the FED easing quantitative tightening also raised hopes of rate cuts.
The probability of a 25 BPS rate cut before the end of October just clocked 95%. Note that the likelihood of a 50% plus BPS rate cut was quite low at 2.2%.
FED Rate cut probabilities have been making crypto news headlines in the last few weeks. This is because lower rates are expected to boost liquidity across the markets.
The overall sentiment held by many crypto analysts was that rate cuts would fuel more crypto upside. That was the case in past quantitative easing scenarios.
However, it was worth noting that the Federal Reserve has been walking a tight rope in its attempts to balance the economy.
The FED’s next move could thus be the next major crypto news catalyst. However, it may not exactly be a smooth sail considering the risks ahead.
Stagflation Risks Could Determine Crypto Market’s Fate in 2026
Trump’s administration has recently been reporting elevated unemployment data. Moreover, Trump has been calling for rate cuts, yet inflation remained high.
Analysts have been warning that the market could be headed for a stagflation environment. This is where the market will be characterized by elevated inflation, high unemployment and weak economic growth.
This may explain why the U.S government is pushing towards rate cuts in an attempt to boost the liquidity situation.
This could stimulate economic growth and create more jobs, but more liquidity in the market may lead to higher inflation.
These concerns recently contributed to rising gold prices as investors moved towards limiting their exposure amid the rising uncertainty.
Those concerns were recently validated after the Bank of America acknowledged the stagflation risks and raised its gold target.
Yes, FED rate cuts are coming but stagflation risks throwing the market into more uncertainty in the coming months.
Some analysts believe that stagflation will create a risk-off economic environment which may not favor heavy liquidity flows into crypto.
On the other hand, a stagflation environment may boot the shift away from the U.S dollar. Such an outcome may fuel more flows into Bitcoin and altcoins.
The crypto market may secure a chance to decouple from the stock market. While this may still be rooted in speculation, the real outcome still within the realm of uncertainty.