Interest rate cuts are typically bullish for crypto because lower rates boost liquidity and risk appetite; expected Federal Reserve cuts in 2025 could drive inflows to digital assets and support higher crypto prices as investors seek yield.
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Expected Fed rate cuts in 2025 increase liquidity and risk-taking for crypto markets.
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Market probabilities and bank forecasts point to multiple 25 BPS cuts beginning in September 2025.
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Over 88% of traders price a 25 BPS cut at the next FOMC meeting; historical data links lower rates with asset-price appreciation.
interest rate cuts crypto — Fed rate-cut probabilities surge for 2025; learn how expected cuts could boost crypto liquidity and prices. Read more.
What is the impact of interest rate cuts on crypto prices?
Interest rate cuts drive liquidity and risk-on flows into crypto markets, increasing buying pressure and supporting higher prices. Lower rates reduce funding costs for leveraged traders and make cash and bonds less attractive, shifting capital toward higher-yielding digital assets in many historical cycles.
Interest rate cuts are a bullish catalyst for crypto prices, as investors increase their risk appetite during times of credit expansion.
Several financial institutions and market analysts are now projecting the US Federal Reserve, the country’s central bank, will slash interest rates from the current target rate of 4.25%–4.5% at least twice in 2025.
The banking forecasts followed a weak August jobs report that saw only 22,000 jobs added for the month, versus expectations of about 75,000.
How many rate cuts are banks and markets expecting in 2025?
Bank of America now projects two 25 basis point (BPS) cuts in 2025, one in September and another in December, while Goldman Sachs forecasts three 25 BPS cuts beginning in September and continuing through October and November. Citigroup projects a total 75 BPS in 2025, spaced across multiple meetings. These forecasts reflect shifting probability as US labor data softened.
Interest rate target probabilities at the next Federal Reserve meeting in September. Source: CME Group
Over 88% of traders now expect a rate cut of 25 BPS at the next Federal Open Market Committee (FOMC) Meeting in September, and about 12% of traders expect a 50 BPS cut, according to data from the Chicago Mercantile Exchange (CME) Group.
Why do lower interest rates typically boost crypto liquidity?
Lower interest rates reduce the opportunity cost of holding risk assets and lower margin funding costs. Institutional and retail investors often reallocate cash into higher-risk assets, including cryptocurrencies, when bond yields fall.
Historically, easing cycles have coincided with greater crypto inflows and stronger price performance as global liquidity expands.
Most traders now anticipate rate cuts amid massive job numbers revisions
Federal Reserve Chair Jerome Powell signaled a potential rate cut in September during his keynote speech at the Jackson Hole Economic Symposium in Wyoming on August 22. The remarks came amid signs of a weakening US jobs market, which is central to the Fed’s dual mandate of maximum employment and price stability.
US Jobs market shows signs of weakening, with more unemployed people than job openings. Source: The Kobeissi Letter
“The US just revised the June jobs report lower for a second time, for a total of -160,000 jobs. Now, the US has officially lost 13,000 jobs in June,” the Kobeissi Letter said in a post on X. The newsletter also warned that the US Bureau of Labor Statistics revised 2024 job numbers downward by about 818,000, with potential further downward revisions for 2025.
How should crypto investors respond to expected rate cuts?
Investors should monitor liquidity, funding rates, and macro risk indicators. Lower rates can justify higher asset allocations to crypto, but risk management is essential: maintain diversified positions, set stop-loss levels, and monitor leverage usage closely.
Frequently Asked Questions
Will Fed rate cuts automatically make Bitcoin and altcoins rise?
Not automatically. Rate cuts increase liquidity and improve the macro backdrop, which historically supports crypto gains, but price moves depend on market positioning, liquidity flows, and risk sentiment at the time.
How soon do crypto markets react to Fed cuts?
Markets often price in anticipated cuts weeks or months in advance. Crypto can react immediately to changes in rate-cut probabilities; realized cuts may reinforce the move if liquidity expands and risk appetite grows.
Key Takeaways
- Fed easing supports crypto: Expected 2025 cuts increase liquidity and risk appetite for digital assets.
- Market pricing matters: Over 88% of traders price a 25 BPS cut at the next FOMC meeting.
- Risk management: Investors should balance potential upside with prudent leverage and diversification.
Conclusion
Expected interest rate cuts in 2025 are a positive macro catalyst for crypto by expanding liquidity and encouraging risk-on positioning. Market probabilities and bank forecasts now point to multiple cuts starting in September, which could support higher crypto prices if liquidity flows into digital assets. Investors should monitor probabilities, funding rates, and job-market revisions while keeping disciplined risk controls in place.
