Bitcoin Rides Fed Rate Cut to $118K as Crypto Sees Green

The U.S. Federal Reserve’s 25-basis-point rate cut on September 17, 2025, marked a pivotal moment for the cryptocurrency market, with Bitcoin surging to an unprecedented $118,000 in the aftermath. The decision, widely anticipated by financial markets, signaled a policy pivot amid slowing economic growth and persistently elevated inflation. With the Fed’s benchmark interest rate now set between 3.75% and 4.00%, the move eased financial conditions and weakened the U.S. dollar, creating a favorable environment for risk-on assets like Bitcoin and other cryptocurrencies.

The immediate impact was evident in the market dynamics. The U.S. Dollar Index (DXY) declined ahead of the decision, while major equities such as the S&P 500 and Nasdaq reached record highs, suggesting anticipation of the rate cut’s stimulative effects. Bitcoin, often viewed as a hedge against fiat currency depreciation, appeared to benefit directly from the weaker dollar. The same pattern was observed in the broader crypto space, where most major cryptocurrencies posted positive returns in the lead-up to the Fed’s announcement.

The move also triggered a wave of speculation and activity in the crypto derivatives market. Open interest and funding rates for perpetual contracts saw significant movement, reflecting heightened leveraged positions among traders. The Altcoin Season Index, a metric tracking the relative strength of altcoins to Bitcoin, climbed into the 60s, indicating a potential shift in capital toward smaller tokens. However, analysts caution that the first rate cut in a cycle often brings volatility, and the market remains exposed to potential corrections, particularly in the altcoin segment.

Market sentiment was sharply divided. Bullish analysts highlighted the liquidity tailwinds and institutional inflows as potential catalysts for continued growth in Bitcoin and the broader crypto market. Spot ETF inflows, which had been steadily increasing prior to the rate cut, were seen as an additional driver of demand. Conversely, bearish voices warned of stagflation risks, particularly given the Fed’s continued emphasis on inflation concerns. The triple witching expiration in equity markets added another layer of uncertainty, with historical data indicating an average of -1.17% returns in the week following such events. This could translate to a 5–8% pullback in Bitcoin and even steeper corrections in altcoins.

The reaction from institutional investors was also notable. The approval of the PENGU ETF by the SEC, which seeks to combine PENGU tokens and Pudgy Penguins NFTs, signaled growing institutional interest in meme-based and NFT-linked digital assets. The SEC’s acknowledgment of the ETF filing led to a 23% jump in PENGU’s price, reflecting broader optimism about the regulatory landscape for crypto products. This development also highlighted the evolving dynamics between traditional finance and crypto markets, as more regulated vehicles seek to bridge the gap.

Looking ahead, the Fed’s tone during its post-meeting press conference will play a critical role in shaping market sentiment. While the rate cut provided immediate relief, any hint of cautious policy or inflationary concerns could temper optimism. Additionally, the outcome of SEC decisions on broader crypto ETFs, particularly those tied to Bitcoin and Ethereum, could influence the trajectory of crypto prices in the coming months. The current macroeconomic environment, characterized by sticky inflation and a fragile labor market, means that further policy uncertainty remains a key risk for the crypto sector.