Bitcoin News Today: Investors Bet on Fed Rate Cut, Flee to Riskier Crypto Assets

Federal Reserve Chair Jerome Powell's recent remarks at the Jackson Hole Economic Policy Symposium have reignited speculation about an imminent rate cut, sparking heightened volatility in the cryptocurrency markets. Traders are now pricing in an 89% probability of a Fed rate reduction in September, a significant jump from the 75% chance prior to Powell’s speech [2]. The prospect of lower borrowing costs has energized Wall Street, with the S&P 500 rising 1.3% and Treasury yields plummeting as investors rushed to lock in higher rates before a potential cut [2]. The move has had a ripple effect on crypto markets, where volatility is often amplified by thin liquidity and fragmented trading venues [4].

In his speech, Powell emphasized the "curious state of balance" in the U.S. labor market, where both employer demand and workforce supply are waning [2]. While the unemployment rate remains relatively low, job growth has slowed significantly, with employment gains falling far below expectations. Powell noted that downside risks to employment are rising and could materialize rapidly in the form of widespread layoffs and higher unemployment. These warnings have heightened uncertainty about the economic outlook and contributed to a broader market pivot toward assets perceived as riskier or more volatile.

Crypto markets have responded to Powell’s signals with mixed reactions. Bitcoin, long considered the most volatile of major assets, has shown signs of maturing. Its annualized volatility has dropped to 38%, a level comparable to large-cap equities like Starbucks or Goldman Sachs [6]. This shift has driven speculative traders to seek higher-risk, higher-reward assets, particularly Ethereum. Ether ETF volumes have matched or even exceeded Bitcoin’s on certain days, with products like the BlackRock Ether ETF capturing significant attention. Ethereum's more pronounced price swings and faster-moving fundamentals have made it a favored asset for short-term traders [5].

However, the increased focus on Ethereum and altcoins comes with its own set of challenges. Unlike Bitcoin, which benefits from deeper liquidity, smaller-cap cryptocurrencies often suffer from fragmented order books and limited trading depth. This fragility magnifies the impact of large sell orders or leveraged liquidations. In July 2025, a sharp decline in several major altcoins led to over $200 million in liquidations, driven by thin liquidity and leveraged positions [4]. In a resilient market, volatility can be absorbed without catastrophic consequences, but in crypto’s current environment, even moderate sell-offs can trigger cascading failures.

The interplay between Fed policy and crypto markets underscores the growing interconnectedness of traditional and digital asset classes. As the Fed weighs the risks of rising inflation and a weakening labor market, its decisions will have far-reaching implications for global financial conditions. Powell’s acknowledgment of the potential for prolonged inflationary pressures from Trump-era tariffs has added complexity to the Fed’s balancing act [2]. While a rate cut could provide short-term relief to a slowing economy, it also risks inflating asset bubbles and deepening speculative excess in markets like crypto.

In the days leading up to Powell’s speech, the probability of a rate cut had already been climbing, reaching 71% on Friday morning [2]. This uncertainty created a backdrop of heightened market anticipation, with asset prices across the board reacting to every nuance of Powell’s comments. As the Fed moves closer to implementing a rate cut, the cryptocurrency market will likely remain a key barometer of investor sentiment and risk appetite. The challenge for market participants will be navigating the heightened volatility while avoiding the structural fragilities that could turn a market correction into a more severe crisis.

Source:

[1] title1 (https://en.wikipedia.org/wiki/Jerome_Powell)

[2] title2 (https://www.cnn.com/business/live-news/fed-powell-jackson-hole)

[3] title3 (https://www.cbsnews.com/news/jerome-powell-jackson-hole-speech-interest-rate-federal-reserve/)

[4] title4 (https://gravityteam.co/blog/market-fragility-crypto-liquidity-real-risk/)

[5] title5 (https://www.mitrade.com/insights/news/live-news/article-3-1062149-20250822)

[6] title6 (https://news.bloomberglaw.com/crypto/bitcoin-volatility-collapse-forces-risk-loving-traders-elsewhere)