Bitcoin Holds Steady, Eyes Long-Term Gains After Fed’s Rate Cut

On September 17, 2025, the Federal Reserve cut interest rates by 0.25% to 4%-4.25%, a move Chair Jerome Powell called a “risk management cut” amid cooling inflation (2.9% in August) and a softening jobs market (22,000 nonfarm payrolls). Markets, having anticipated this, showed mixed reactions.

Bitcoin’s Response

Bitcoin, trading at $117,417 on September 19 (up 0.81% daily), remained stable with a $2.34 trillion market cap and $53.5 billion trading volume. Despite a dip to $115,000 post-announcement, it recovered to $117,240 by September 18, gaining 3.04% weekly and 25.82% year-to-date. However, September’s historical volatility and the $124,517 all-time high (5% away) temper expectations. Unlike the 2020 cuts sparking a 300% surge, this cut supports steady institutional inflows for Bitcoin’s 19.92 million circulating supply without overheating.

Liquidity Boost and Risks

Lower rates could redirect capital from $7.2 trillion in money market funds to risk assets like Bitcoin, especially with Powell hinting at two more cuts by year-end. Bitcoin’s 0.45-0.9 correlation with stocks suggests potential gains if equities rise. However, stagflation risks—elevated jobless claims and potential inflation spikes—could force rate hikes, threatening bubbles like 2021’s crypto winter. Bitcoin’s $2.47 trillion fully diluted cap requires disciplined capital flows.

Regulatory Catalyst

On September 18, the SEC approved the Grayscale Digital Large Cap Fund, the first multi-asset crypto ETP, and new listing standards for commodity trusts on Nasdaq, Cboe BZX, and NYSE Arca. These moves legitimize crypto, echoing 2024 ETF approvals that reduced exchange-held Bitcoin by over 1 million BTC. With Bitcoin trading above its 50-day and 200-day EMAs, a breakout to $118,000-$120,000 is possible if dovish Fed signals persist.

Bitcoin’s muted response reflects market anticipation, not weakness. Regulatory advancements and potential liquidity surges signal long-term upside, but inflation risks demand caution. Investors should monitor FOMC statements and jobs data closely to navigate this evolving landscape.