TL;DR
- The Fed reduces rates by 25 basis points (to 3.75%-4.00%), the first cut since 2023.
- The central bank also announced the end of “Quantitative Tightening” (QT) by December 1.
- Bitcoin reacted cautiously, trading just above $111,160.
The U.S. Federal Reserve (Fed) announced a significant pivot in its monetary policy this Wednesday, cutting interest rates by 25 basis points. The new target range is set between 3.75% and 4.00%, marking the first rate reduction since 2023.
Simultaneously, the Fed confirmed it will end its quantitative tightening (QT) program on December 1, thereby halting its balance sheet reduction.
This move marks a clear rebound from the central bank’s previous focus, which was centered on curbing inflation through tighter liquidity.
According to the FOMC statement, policymakers acted in response to slowing inflation, weakening labor conditions, and rising downside risks to employment.
Although they noted that inflation remains above the 2% target, they stated that the “balance of risks” has now shifted in favor of supporting growth.
Market Reaction and the Impact of the Rate Cut on Bitcoin
The initial reaction in the cryptocurrency markets was cautious. Following the announcement, the price of Bitcoin (BTC) showed little volatility, remaining stable. According to CoinMarketCap data at the time of writing, BTC is trading around $111,160, while Ethereum (ETH) is hovering around $3,966. The Fear and Greed Index fell to 39 (“Fear”), reflecting investor caution despite the policy change.
Historically, a lower interest rate environment and the end of QT are positive for risk assets like cryptocurrencies, as they inject fresh liquidity into global markets.
The impact of the rate cut on Bitcoin could be reflected in a revival of ETF inflows and increased demand for stablecoins, as investors rebalance their portfolios in response to a more dovish Fed stance.
However, the Fed’s reference to “elevated uncertainty” indicates that volatility may persist. Traders are awaiting Jerome Powell’s press conference to confirm if this is the beginning of a sustained easing cycle.
