The U.S. Federal Reserve cut interest rates for the first time in 2025 on Wednesday, lowering the federal funds rate to a range of 4.25%–4.50%. The move, coupled with cautious remarks from Chair Jerome Powell, immediately drew attention from both financial markets and the crypto sector.
Interestingly, Bitcoin showed little reaction to the decision. Within six hours of the announcement, the cryptocurrency hovered near $117,000 before easing slightly to $116,600, according to CoinGecko. U.S. equities and other risk-on assets also remained largely unimpressed, with both the Nasdaq and S&P 500 slipping.
Despite the muted response, analysts remain optimistic about Bitcoin’s outlook for the remainder of the year. They argue that the Fed’s framing of the cut as a “risk-management” move paves the way for additional rate reductions, which could ultimately support the crypto market.
Ira Auerbach, former head of digital assets at Nasdaq, commented: “Looser financial conditions should be supportive of the crypto ecosystem. The FOMC has clearly signaled a data-dependent path, which means more rate cuts are likely ahead.”
Powell acknowledged that the U.S. labor market is weakening, with more than 900,000 jobs revised downward in the year ending March. He noted that downside risks to employment have increased, while inflation remains elevated, partly due to higher tariffs on goods.
Median Fed projections suggest interest rates could fall to 3.6% by the end of 2025, requiring at least one large cut in the final two meetings of the year. Rates are expected to decline further to 3.1% by 2027.
Beyond monetary policy, other factors may also boost Bitcoin. Gerry O’Shea, head of global market research at crypto asset manager Hashdex, said: “Bitcoin’s immediate response may have been muted, but continued demand from ETFs and corporate treasuries will likely serve as key drivers in the weeks ahead.”
Stephane Ouellette, CEO of FRNT Financial, added that financial markets are entering a new “fiat devaluation cycle” not seen since 2021, positioning Bitcoin as an attractive hedge. “As interest rate cuts continue, investors will gradually allocate more to Bitcoin to protect their purchasing power,” he said.
With the Fed facing a delicate balancing act between inflation and employment, markets are betting on a sustained easing cycle. If those expectations play out, Bitcoin could gain fresh momentum and set its sights on new all-time highs in the months ahead.
