Investor Sentiment Swings as Fed Cuts Rates, Crypto Reacts

The Federal Reserve's decision to cut interest rates by 25 basis points on Wednesday has sparked a mixed reaction across the cryptocurrency market, with Bitcoin and altcoins such as Ethereum and XRP showing notable price movements. The central bank’s revised economic outlook, including a shift in its 2025 inflation forecast, has created a complex landscape for investors. The benchmark policy rate now sits in the range of 4.00% to 4.25%, following unanimous support from the Federal Open Market Committee (FOMC), with 11 of the 12 members voting in favor of the cut .

Bitcoin surged past the $117,000 level following the Fed’s announcement, driven by a surge in risk-on sentiment. The uptrend was supported by an improving economic outlook and the Fed’s indication of two additional rate cuts expected this year. Technical indicators also showed signs of bullish momentum, with the Relative Strength Index (RSI) climbing to 61 from a low of 37 in late August. Traders are now watching for a confirmation signal from the SuperTrend indicator to validate the potential for a breakout above the $120,000 threshold, a level not seen since August .

Ethereum also experienced a positive reaction, with prices stabilizing around the $4,600 mark. While the asset faced minor outflows in its spot ETFs on Wednesday, the broader trend suggests a possible short-term breakout toward its record high of $4,956. The 50-day, 100-day, and 200-day Exponential Moving Averages (EMAs) currently serve as support levels for Ethereum. Additionally, the RSI stands at 57, suggesting further upside potential. However, if institutional investors remain cautious and reduce exposure, a correction below the $4,229 level could occur before another bullish attempt .

XRP, another altcoin, showed signs of strength as bulls regained control of the $3.00 psychological level. A recovery in the RSI to 58 from 51 on Monday supported the short-term bullish momentum. A breakout above $3.18 could increase the likelihood of reaching $3.50 and eventually challenging the all-time high of $3.66. The altcoin's performance is being closely monitored as it aligns with broader market optimism, though caution is advised given the potential for profit-taking and market volatility .

The broader market dynamics highlight the interplay between ETF inflows and asset price movements. Ethereum ETFs saw a net inflow of $1.1527 million on January 14, 2025, contributing to a cumulative total of $2.414 billion . Meanwhile, Bitcoin ETFs faced outflows totaling $209.82 million, with significant declines from major funds such as GBTC and FBTC. These movements reflect investor sentiment and institutional positioning, with Ethereum ETFs showing stronger inflows and growing confidence from market participants .