“The Fed’s recent actions have prompted a cautious rally in BTC, XRP, SOL, and DOGE, with the Dollar Index remaining robust.”

Fed’s Dovish Move Spurs Crypto Gains, but Dollar Strength Could Cap Upside

Major cryptocurrencies, led by Bitcoin, have resumed a measured upward climb following Wednesday’s Federal Reserve rate cut, though the dollar’s resilience may temper gains.

The Fed lowered its benchmark rate by 25 basis points to 4% and hinted at the possibility of faster easing over the next year, providing a boost to risk assets.

Bitcoin and Ethereum Lead the Rally
Bitcoin (BTC) surged above $117,900, the highest since August 17, breaking out of recent sideways trading and continuing its recovery from early September lows near $107,200. BTC was up nearly 1% over 24 hours at the time of writing.

Ethereum (ETH) rose 2.7%, remaining confined within a four-week contracting triangle. Other major tokens—including Dogecoin (DOGE), Solana (SOL), and BNB—gained over 4%, while XRP climbed nearly 3% following a bullish breakout from a descending triangle.

Institutional Activity Supports Solana and XRP
Solana briefly touched $245, nearing its weekend high, after CME Group announced plans to list SOL options starting October 13, alongside XRP options. These offerings are expected to facilitate institutional participation and allow traders to better manage exposure.

Matt Mena, crypto research strategist at 21Shares, said the Fed’s dovish signals create an “asymmetric setup” for Bitcoin. “While today’s 25bps cut sparked the rally, the path implied by the Fed’s dot plot may drive BTC toward new highs into year-end. Bitcoin could reach $124,000 by late October, with Ethereum surpassing $5,000,” Mena noted.

Dollar Resilience Presents Headwinds
Despite dovish projections, the Dollar Index (DXY) rebounded to 97.30, recovering from a July low of 96.37. Powell’s comments emphasizing that rapid successive cuts are not guaranteed, along with ongoing balance sheet runoff and high inflation, may explain the dollar’s strength. A stronger DXY could tighten financial conditions and weigh on crypto gains.

Tail Risk Considerations
Sophisticated traders are pricing in tail risk—low-probability, high-impact events—according to crypto financial platform BloFin. “BTC’s sensitivity to interest rate risk has spurred demand for short-dated put spreads, signaling concern over downside events,” BloFin said.

Put spreads allow traders to profit from declines in the underlying asset, highlighting that market participants are hedging against potential shocks while cryptocurrencies continue their post-Fed recovery.