According to the latest reports, the Fed has delivered its first interest rate cut of Trump’s second term. The central bank cut its benchmark lending rate by a quarter point of 25bps to a new range of 4% to 4.25%. For crypto, lower rates make bonds and cash less attractive and free up capital for higher-yielding assets like Bitcoin and Ethereum.
Adding to this Fed rate cut mix, a rare political fight over Fed appointments is brewing and has raised concerns about the central bank’s independence.
Fed Shake-Up
This rate-cut delivery comes as there is a political battle happening over the Fed. Based on reports, President Trump has sought to remove Governor Lisa Cook (a Biden appointee) on contested grounds, while successfully pushing to install economist Stephen Miran on the Board.
Just recently, a US appeals court blocked the White House from firing Cook, immediately ruling that her due-process rights likely had been violated. The court noted that by law, Fed governors can only be removed “for cause” and no president has ever removed a governor since 1913.
At the same time, the US Senate confirmed Trump’s pick Dr. Stephen I. Miran by a 48–47 party-line vote. Miran the White House economic adviser will sit on the Fed Board at least through January 2026. Analysts note that Miran who has echoed President Trump’s calls for rate cuts may have dissented for a bigger cut than the quarter-point the Fed gave.
The battle to remove Cook and reshuffle the Fed reveals the tension between the Fed’s independence and political pressure. Opponents of the White House effort say a politicized Fed will lead to unpredictable policy.
Crypto lawyer Aaron Brogan notes the Fed’s decisions on bank supervision indirectly impact crypto. He says “a less independent Fed” will still have influence but policy will be “more changeable and subject to public mood”.
In other words, a dependent Fed will swing more towards whatever the administration wants, in this case rate cuts but the full impact on future crypto regulation is unknown.
Also read: Trump’s Push to Oust Fed Governor Adds Drama to Rate Cut Expectations and Crypto Markets
Crypto Markets Ready for Fed Rate Cut Rally
Crypto traders have expected a boost from easier monetary policy prior to the recently announced rate cut. As sources reported, many investors think lower rates will spark a crypto rebound. Kevin Rusher, founder of RWA protocol RAAC, says a quarter-point rate cut will “unlock the $7.2 trillion sitting in money market funds” earning nearly zero.
He thinks much of that capital will flow into DeFi and RWA projects that offer higher yields as investors chase returns once cash yields drop.
Alice Liu, CoinMarketCap research lead, notes that “high-beta” layer-1 tokens (like Ethereum and Solana) behave like growth stocks as they are super sensitive to liquidity and risk appetite. She says the rate cuts will accelerate capital inflows into Ethereum’s “digital oil” narrative or Solana’s adoption story.
DeFi tokens tied to lending and trading (DEX) are also “more attractive” in a low-rate environment.
Indeed, history shows crypto assets often rally after the Fed eases. For example, after the Fed’s September 2024 cut, Bitcoin jumped about 5% and major crypto-related equities (Coinbase, MicroStrategy, miners) soared. 21Shares strategist Matt Mena said the cut would “bring back liquidity, spark a risk-on sentiment and fuel a sharp rally”.
Expert Insights: Liquidity, Predictions and Crypto
However, market experts warn that this is not a done deal. Crypto strategist Nic Puckrin says so much is already priced in that the market could see a “sell the news” dip around the cut.
Before the Fed rate cut delivery came live, Goldman Sachs CEO David Solomon had told CNBC that a 50 bp cut “isn’t on the cards” and a 25 bp cut is much more likely. His view, shared by many big banks predicted the Fed’s move will be moderate.
Still, even a quarter-point cut could weaken the US dollar and Treasury yields and make risk assets more attractive overall.
Many also point to the context beyond rates. The Fed’s switch after a long tightening cycle is itself a big signal. Decades of data show that equity markets go up after the first rate cut of a cycle (if no recession). Crypto, though newer, has tracked stock risk sentiment.
On top of that, recent regulatory developments have boosted confidence.
Long Term Implications and Outlook
Looking ahead, experts project the near-term outlook for crypto appears bullish as the Fed has cut rates. Lower rates mean more liquidity chasing returns, and crypto could be a prime beneficiary. That said, volatility is still inevitable. Analysts expect a short-term pop and possible shakeout as traders adjust their positions.
Most importantly, a Fed board less insulated from politics raises new risks for crypto policy. Experts have aired that if Fed governors are more beholden to a political agenda, monetary policy could swing wildly and affect risk markets.
It also raises questions about regulatory oversight. While the Fed itself isn’t the main crypto regulator, it influences banks that service crypto. A Fed under pressure might enforce or relax financial controls in line with political winds.
As lawyer Aaron Brogan warns, in a politicized Fed, “nobody knows” exactly how policy will change, only that it will be more “changeable and subject to public whims”.
Also read: Fed Rate Cut Hype: Could This Spark the Next Crypto Crash
Conclusion
Based on the latest research, the latest Fed rate cut could amp crypto markets’ rally in the long term with renewed liquidity and risk appetite. Analysts expect a surge in crypto asset prices after the Fed cuts but likely short term volatility.
The crypto economy is expected to benefit from easy money and possibly friendlier policy if political support holds. Investors are advised to be ready for a wild market in the coming weeks with Bitcoin and other cryptos leading the way as markets price in looser Fed policy.
For in-depth analysis and the latest trends in the crypto space, our platform offers expert content regularly.
Summary
The US Federal Reserve has cut rates by 25bps. This comes as the White House is trying to remove Governor Lisa Cook and has added economist Stephen Miran to the Fed board. Experts say lower rates could unlock trillions for crypto investments and lift Bitcoin, Ethereum and DeFi tokens.
Glossary
Federal Reserve (Fed): The US central bank; which sets monetary policy (interest rates) to manage inflation and growth.
Interest Rate Cut: When the Fed lowers its target interest rate; it makes borrowing cheaper. This injects liquidity into the economy and can boost asset prices.
Cryptocurrency: Digital assets like Bitcoin (BTC) and Ethereum (ETH) traded on decentralized networks.
DeFi (Decentralized Finance): Financial services (lending; trading, etc.) built on blockchain platforms.
Risk-On vs Risk-Off: “Risk-on” markets favor high-risk assets (tech stocks, crypto) and occur when investors are optimistic. “Risk-off” is the opposite; favoring safe assets like bonds. Fed cuts usually mean risk-on.
Frequently Asked Questions About Fed Rate Cuts
What does a Fed rate cut mean for investors?
It lowers borrowing costs and makes safe assets less attractive; so investors go for higher returns in stocks and crypto.
How do Fed rate cuts affect cryptocurrency?
Lower rates increase liquidity and risk appetite. Bitcoin and high-beta cryptos like ETH/SOL usually go up after Fed cuts, based on history.
Who is Lisa Cook and why is she in the news?
Lisa Cook is a Fed Governor appointed by President Biden. President Trump’s administration tried to fire her but courts blocked the removal.
Who is Stephen Miran and why was he confirmed?
Stephen Miran is a Trump economic adviser just confirmed to the Fed Board. His appointment is seen as aligning the Fed with the administration’s push for lower rates.
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