Fed Rate Cut Fails to Boost Bitcoin as Markets Shrug

The U.S. central bank’s decision to slash the federal funds rate by 0.25% on Wednesday, lowering it to a range between 3.75% and 4%, marked the second consecutive cut following a similar reduction last month. The move was widely anticipated by market participants, with the CME FedWatch Tool predicting a more than 99% probability of a quarter-point cut. Even Myriad, a prediction market known for conservative forecasts, showed about 90% of respondents expecting the same outcome.

Gerry O’Shea, head of global market insights at crypto asset manager Hashdex, noted that “Today’s decision to drop the federal funds rate another 25 basis points was highly anticipated,” adding that “For bitcoin and other digital assets, this expected move should not have a significant short-term impact on prices.” The lack of surprise appeared to neutralize any potential bullish effect on cryptocurrency markets, with Bitcoin trading at about $111,700, down 3% over the past 24 hours, and Ethereum changing hands at approximately $4,000, also declining 3.2%.

The Federal Reserve’s decision came amid mounting evidence of economic softening. An interim September jobs report from the Chicago Fed showed unemployment remaining around 4.3%, representing a four-year high. Meanwhile, the Conference Board’s Expectations Index, a closely watched measure of economic sentiment, remained below the threshold that typically signals an approaching recession.

In their statement, the Federal Reserve acknowledged “the shift in the balance of risks” as justification for the rate reduction. The central bank’s concerns about economic growth appeared to outweigh persistent inflation worries, with the Consumer Price Index rising 3% in the 12 months through September, continuing an upward trend that began after a 2.3% reading in April. This places inflation stubbornly above the Fed’s 2% annual target.

The vote was not unanimous, revealing ongoing divisions within the central bank. Stephen Miran, a recent White House appointee to the Fed Board of Governors, voted for a more aggressive 0.50% cut, as he had in September, while Jeffrey Schmid voted to keep rates unchanged, highlighting the complex balancing act facing policymakers.

Bitcoin’s performance following the rate cut continued its recent weakness, with the largest cryptocurrency by market capitalization sagging more than 10% after dropping below $105,000 earlier this month. The digital asset has lingered well below the all-time high it set earlier in October, despite some analysts’ expectations that lower rates injecting liquidity into markets could bolster Bitcoin and other risk-on assets.

Hashdex’s O’Shea suggested that other factors may be exerting more immediate influence on cryptocurrency prices. He pointed to “the government shutdown, tariff policies, and earnings reports from a number of large tech companies” as potentially having “more of an effect on prices this week” than the anticipated rate cut. Investors also awaited Fed Chair Jerome Powell’s comments on ending the bank’s quantitative tightening program, which involves unloading Treasuries and mortgage-backed securities acquired during earlier market support operations.

Despite near-term volatility, O’Shea maintained a constructive longer-term view, writing that investor demand for exchange-traded funds and an improved regulatory environment in the U.S. “continues to support our view that bitcoin may surpass its previous all-time high later this year.” This optimism contrasts with the immediate market reaction, suggesting that while traditional monetary policy moves may have lost their surprise factor for crypto markets, underlying structural developments continue to support positive price expectations.