Fed Eases Policy in Precautionary Move, Bitcoin Watches for Breakout Potential

Fed Cuts Rates for First Time Since 2022, Market Turns to Bitcoin for Clues

The Federal Reserve lowered its benchmark interest rate range by 25 basis points to 4.00%–4.25% on Wednesday, its first rate cut in ten months. The move, which Chair Jerome Powell described as a “risk management cut,” brings rates to their lowest since December 2022 as officials respond to softening economic conditions.

Powell said growth “moderated” in the first half of the year and the job market has shown signs of slowing, partly reflecting changes in immigration. Still, he emphasized that Fed officials saw little justification for a larger reduction, warning against rushing into more aggressive action.

Labor market data has increasingly highlighted cracks. The August jobs report showed just 22,000 new hires, while unemployment rose to 4.3%, the highest since 2021. Previous reports were also revised lower, underscoring the slowdown.

“Markets had largely priced in this cut, but the Fed’s updated dot plot suggests another 50 basis points of easing ahead,” said Chris Rhine, Head of Liquid Active Strategies at Galaxy. “Future Fed leadership may lean even further toward rapid rate reductions.”

The Fed’s policy pivot also comes against a backdrop of political pressure. President Trump has criticized the central bank for being too hesitant, but Powell reaffirmed the Fed’s independence, saying it remains “strongly committed” to its mandate.

Market Response
Bitcoin briefly spiked 1% to $115,797 after the announcement but soon reversed, sliding 1.5% lower to trade near $115,092. U.S. equities, which had been rallying into the decision, also gave back early gains, while gold mirrored the same pattern.

“The dovish tilt in the dot plot is more meaningful than the 25bp cut itself,” said Matt Mena, Crypto Research Strategist at 21Shares. “That repricing dynamic could create an asymmetric setup for Bitcoin, potentially setting the stage for fresh highs before year-end.”

Outlook
The Fed’s projections show a divided committee, with a narrow majority expecting two additional cuts this year. Investors will now focus on upcoming data to gauge whether policymakers accelerate the pace of easing.