Markets Sell the News as Fed Eases, Crypto Holds Its Fire

Federal Reserve Chair Jerome Powell announced a 25 basis point rate cut at the September 2025 FOMC meeting, marking the first adjustment in 2025 and sending mixed signals to financial markets. Despite expectations that the move would boost risk-on assets, both the S&P 500 and the cryptocurrency market experienced immediate dips, with the S&P 500 falling 0.45% and the total crypto market cap declining by 0.40% within the first hour of the announcement. The reaction highlighted the complexity of market sentiment, with the pullback triggering over $177 million in liquidated long positions and $83 million in liquidated shorts. This pattern suggested a "buy the rumor, sell the news" dynamic, as investors had already priced in the likelihood of a rate cut ahead of the announcement.

Bitcoin, which had previously shown a strong rally in anticipation of the decision, saw a muted response post-announcement. It traded near $116,200 over the following hours, with analysts noting that the market had largely accounted for the rate cut in advance. Some analysts, however, remained optimistic about Bitcoin’s potential to rise further in the coming weeks, particularly if additional rate cuts were expected. Ira Auerbach, former head of digital assets at Nasdaq, described the move as a “risk-management cut” and suggested that easier financial conditions would likely benefit the crypto ecosystem. Similarly, Gerry O’Shea of Hashdex noted that Bitcoin’s muted response was not unusual and that other factors—such as increased demand for corporate treasuries and ETFs—could drive it to new all-time highs.

Stablecoin flows also provided insight into investor positioning. Binance reported record inflows of stablecoins ahead of the FOMC meeting, signaling that institutional and smart money participants were preparing for potential market volatility or positioning for a new bullish wave. The dominance of Bitcoin declined following the rate cut, suggesting that altcoins could gain traction if market conditions improved and liquidity expanded. However, altcoin season’s strength would depend heavily on the Fed’s continued dovish stance and broader macroeconomic stability.

The announcement also reignited debate over the long-term implications of monetary policy for the crypto market. Analysts pointed to historical patterns, such as Bitcoin’s 15% rally following the 2024 50 bps cut, as potential indicators of future price action. However, there were warnings about stagflationary risks and the potential for sharp corrections, particularly in altcoins, should economic pressures persist. The broader financial landscape—stocks, bonds, and commodities—was also expected to feel the ripple effects of the rate cut, with lower borrowing costs likely to support growth sectors and weaken the U.S. dollar.

Looking ahead, the market will closely monitor the Fed’s updated economic projections and Powell’s remarks during his post-FOMC press conference for further clues. With more than 90% probability of a 25 bps cut assigned by CME’s FedWatch tool, expectations are now shifting toward whether the Fed will maintain its dovish stance in upcoming meetings. Investors are advised to remain cautious, given the potential for short-term volatility and the risk of stagflation should inflationary pressures persist despite easing rates.