Investors Bet Big as Fed Easing Fuels Crypto Optimism

Bitcoin rallied as the U.S. Federal Reserve signaled a 25-basis-point rate cut at its September 16–17 meeting, marking the first easing in the current cycle and sparking optimism in risk assets. The move, widely expected by markets, was reflected in the CME Group’s FedWatch data, which assigned a 96% probability to a 25-bps reduction, bringing the target range to 4.00%–4.25%. The decision ignited a surge in Bitcoin, which pushed above $116,000, while Ethereum climbed to $4,650, with both assets showing improved sentiment in the options market.

The rate cut is expected to enhance liquidity and weaken the U.S. dollar, historically favorable conditions for Bitcoin, which is often viewed as a hedge against fiat currency devaluation. The U.S. Dollar Index fell ahead of the Fed announcement, while stock indices reached record highs, suggesting anticipation of the easing. Additionally, Bitcoin and Ethereum ETF inflows remained strong, with Bitcoin ETFs recording a seven-day inflow streak of approximately $292 million as of September 10. However, Ethereum’s ETF inflows showed signs of slowing, with outflows averaging $62 million per day, indicating cautious positioning ahead of the Fed’s decision.

Analysts highlighted diverging views on the market’s response. Bulls pointed to the liquidity tailwind and potential for ETF inflows to fuel further gains, while bears warned of volatility and stagflation risks. Some experts noted that Bitcoin’s performance in past Fed easing cycles, such as in 2019 and 2020, had historically supported its upward trajectory. However, the current macroeconomic backdrop—characterized by above-target inflation, slowing job growth, and persistent stagflation concerns—could limit the duration of any bullish momentum.

On-chain data from CryptoQuant indicated mixed investor behavior. Bitcoin and Ethereum exchange inflows had dropped to multi-month lows, with the average Bitcoin deposit size halving from July to September, signaling reduced selling pressure from larger holders. Meanwhile, stablecoin deposits surged, particularly for Tether (USDT), suggesting investors were preparing liquidity for potential deployment if the Fed delivered a dovish outcome. Altcoin inflows also increased, hinting at speculative positioning or profit-taking ahead of a macroeconomic catalyst.

The options market further reflected shifting sentiment, with Bitcoin’s seven-day call/put skew returning to nearly neutral territory, indicating a more balanced outlook among traders. This marked a reversal from the previous week, when there had been strong demand for put options as a hedge against potential declines. Similar trends were observed in Ethereum, where the skew also improved, signaling reduced downside concerns across major cryptocurrencies. The shift in options positioning aligned with Bitcoin’s recent price action, which saw a 4% gain over the past week and a retest of key resistance levels.

Retail and institutional investors are advised to remain cautious amid the volatility. Experts recommend maintaining low leverage, diversifying portfolios, and preparing for rapid sentiment shifts during Fed week. In particular, altcoins are seen as more vulnerable to corrections, with some analysts predicting 15–20% pullbacks in tokens like XRP and Solana if market conditions turn bearish. The potential for a 50-basis-point surprise cut also remains on the table, albeit with a 6.2% probability, which could trigger a sharper relief rally followed by a reassessment of macroeconomic risks.

Ultimately, the Fed’s post-meeting statement and Chair Jerome Powell’s press conference will play a critical role in shaping market direction. A dovish tone could extend optimism, while a cautious or hawkish message may temper gains. The broader financial ecosystem is also watching closely as cryptocurrencies continue to integrate into traditional market dynamics, with macroeconomic developments playing an increasingly influential role in price action.