Fed Cut Interest Rates Due to Cooling Labor Market

The Federal Reserve cut interest rates to 3.50-3.75% during its December 2025 meeting, as easing inflation and a cooling labor market influenced the decision.

This rate reduction impacts crypto markets by potentially boosting Bitcoin and Ethereum, historically benefiting from lower real yields and a weaker dollar.

Fed Rate Decision: Impact on Crypto and Economy

The Federal Reserve reduced interest rates to 3.50-3.75%, driven by an easing inflation risk and gradual softening in employment data. The decision reflects a strategic move to maintain economic stability amid global financial trends.

This easing in monetary policy aligns with the Fed’s observations of a cooling labor market and inflation pressures that remain above its target. This decision is seen as a step towards potential further rate reductions.

Market responses to the Fed’s decision show cautious optimism. Bitcoin and Ethereum demonstrated modest gains, aligning with a “dovish but cautious” market outlook. Analysts highlight the cut’s potential to bolster crypto markets.

“The decision reflects our assessment of easing inflation pressures and a softening labor market.” — John C. Williams, President & CEO, Federal Reserve Bank of New York

Crypto Prices React: Comparing Past and Present Trends

Did you know? The last easing cycle in 2019 similarly saw Bitcoin prices rise following the Fed’s “insurance cuts,” due to increased risk appetite and lower real yields.

Bitcoin (BTC) is currently priced at $85,784.18 with a market cap of $1.71 trillion, reflecting a 24-hour price drop of 3.89%, according to CoinMarketCap. Market movements show declines over 7, 30, and 90-day periods, indicating broader macroeconomic influences.

Coincu research suggests that the Fed’s rate cuts might lead to increased crypto market activity as a financial strategy to offset lower yields in traditional markets. Historical trends emphasize the growth in risk asset allocations during such policy shifts.