Finance

Bitcoin Dips After Fed’s Rate Cut: How Jerome Powell’s Words Shift Crypto’s Trajectory

Fed cut rates by 0.25%, but crypto prices fell after Powell’s remarks about future cuts.

October 29, 2025, 5:08 PM

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Executive Summary

The U.S. Federal Reserve cut its benchmark interest rate by 0.25%, a widely anticipated move, but cryptocurrency markets saw prices tumble after Federal Reserve Chair Jerome Powell indicated a further December rate cut was “not a foregone conclusion.”

The Fed’s decision to lower rates was based on a “shift in the balance of risks,” citing signs of a slowing U.S. economy like rising unemployment and a low Expectations Index, despite inflation remaining above the 2% annual target.

While short-term crypto market impact from the rate cut is expected to be minimal compared to other economic factors, the central bank’s announcement to conclude reducing its securities holdings and growing investor demand for Bitcoin ETFs are viewed as positive for Bitcoin’s long-term outlook.

The Story So Far

The U.S. Federal Reserve reduced its benchmark interest rate by 0.25% due to recent signals of an economic slowdown, including rising unemployment and a low expectations index, which outweighed concerns about persistent inflation. While the cut was widely anticipated, crypto markets reacted negatively after Chair Jerome Powell tempered expectations for future cuts, contrasting with previous hopes that a shift towards less restrictive monetary policy, which President Trump had previously advocated for, would generally bolster risk-on assets like Bitcoin.

Why This Matters

The Federal Reserve’s 0.25% interest rate cut, while widely anticipated, failed to stimulate the cryptocurrency market, with prices declining after Chair Powell tempered expectations for future cuts, indicating that market sentiment remains highly sensitive to the Fed’s forward guidance on monetary policy. This cautious approach, driven by a complex economic environment balancing slowing growth with persistent inflation, introduces near-term uncertainty for risk assets. However, some analysts maintain a long-term optimistic outlook for Bitcoin, citing growing investor demand for ETFs and an improving regulatory landscape as potential drivers for future growth, despite immediate volatility.

Who Thinks What?

The U.S. Federal Reserve (majority) reduced its benchmark interest rate by 0.25% due to signals of an economic slowdown and a “shift in the balance of risks,” but Federal Reserve Chair Jerome Powell indicated that a further December rate cut was “not a foregone conclusion.”

Dissenting Federal Reserve Board members held differing views: Stephen Miran advocated for a larger 0.50% rate cut, while Jeffrey Schmid voted to keep the rate unchanged.

Gerry O’Shea, head of global market insights at Hashdex, believes the rate cut will not significantly impact digital asset prices in the short term, which are more influenced by other factors, but maintains an optimistic long-term outlook for Bitcoin due to growing ETF demand and an improving U.S. regulatory environment.

The U.S. Federal Reserve reduced its benchmark interest rate by 0.25% on Wednesday, a move widely anticipated by financial markets, yet it left cryptocurrency markets largely flat before prices tumbled following Federal Reserve Chair Jerome Powell’s remarks that a further December rate cut was “not a foregone conclusion.” Bitcoin, the leading cryptocurrency, was trading around $110,700, reflecting a 1.3% decline over the preceding hour, while Ethereum saw a 2.7% drop to approximately $3,890.

Fed’s Rate Decision and Market Reaction

The central bank’s decision lowered the rate banks charge each other for overnight lending to a range between 3.75% and 4%. This adjustment came as recent jobs data and other economic indicators signaled a slowdown in the U.S. economy. Ahead of the announcement, the CME FedWatch Tool, which gauges trader sentiment through futures data, indicated a greater than 99% probability of the rate cut and over a 90% chance of an additional 0.25% reduction in December.

Despite the high anticipation, the initial market response in the crypto sector was muted. However, prices sharply declined after Powell’s press conference, where he tempered expectations for immediate future cuts. Bitcoin had already seen a more than 10% decrease earlier in the month, falling below $105,000 from its recent highs.

Economic Context and Dissenting Votes

The Fed cited a “shift in the balance of risks” as the reason for its decision. This includes an interim September jobs report from the Chicago Fed showing unemployment around a four-year high of 4.3%, and the Conference Board’s Expectations Index remaining below the typical recession-signaling threshold. These concerns about economic slowing outweighed persistent inflation, which has stayed above the Fed’s 2% annual target, with the Consumer Price Index rising 3% in the 12 months through September.

The vote on the rate cut was not unanimous. Stephen Miran, a White House appointee to the Fed Board of Governors, advocated for a larger 0.50% cut, mirroring his stance from September. Conversely, Jeffrey Schmid voted to keep the rate unchanged.

Analyst Perspectives and Future Outlook

Gerry O’Shea, head of global market insights at crypto asset manager Hashdex, commented that the expected rate cut should not have a significant short-term impact on digital asset prices. He suggested that other factors, such as “the government shutdown, tariff policies, and earnings reports from a number of large tech companies,” might exert more influence on prices in the near term.

Powell also announced that the central bank would “conclude the reduction of its aggregate securities holdings,” indicating a shift away from quantitative tightening. Analysts had previously suggested that a move towards less restrictive monetary policy, coupled with lower rates injecting liquidity into markets, could bolster Bitcoin and other risk-on assets.

Last month, the Fed had already slashed the federal funds rate by 0.25%, marking its first cut in a year. This prior inaction had drawn criticism from President Trump, who had regularly expressed concerns about economic performance and threatened to dismiss Powell.

Looking forward, O’Shea maintains an optimistic outlook for Bitcoin. He believes that growing investor demand for exchange-traded funds and an improving U.S. regulatory environment “continue to support our view that Bitcoin may surpass its previous all-time high later this year,” despite potential near-term volatility in digital asset markets.