History repeating itself? After the Fed cut interest rates, the crypto market rose moderately by 2%. Analysts: Replicating the 2024 consolidation followed by an explosion pattern.

After the Fed implemented its first rate cut of the year, the total market capitalization of global crypto assets rose by 2% to $4.2 trillion on Thursday. Bitcoin's price steadily climbed to around $118,000, and major alts like Ethereum and XRP also recorded gains. However, since Fed Chair Powell emphasized that this rate cut is a “Risk Management” measure and maintained a cautious stance on future policy easing cycles, the market's upward momentum was restrained, and the explosive rise that was anticipated did not materialize.

Fed cuts rates by 25 basis points: Market rise is moderate, responding to “suppressed”

Fed Chair Jerome Powell announced the first rate cut of the year at Wednesday's Federal Open Market Committee (FOMC) meeting, lowering the benchmark rate by 25 basis points to a range of 4.00% to 4.25%. Following this news, Bitcoin rose slightly by 1%, trading at $117,426; Ethereum increased by 2.8% to $4,609; and XRP also rose by 2.9% to $3.10.

However, the rise is not rapid. Market sentiment is suppressed by Powell's cautious remarks, as he described the rate cut as a Risk Management measure and emphasized that decision-makers are not in a hurry to accelerate the easing cycle. His comments weakened market expectations for more aggressive rate cuts, thus limiting the rising enthusiasm for risk assets, including Crypto Assets. Notably, the newly appointed official Stephen Miran was the only one to cast a dissenting vote, advocating for a larger rate cut of 50 basis points.

“Buy the expectation, sell the fact”: The interest rate cut has been priced in by the market.

The futures market had fully digested the expectations of interest rate cuts before the meeting. According to the tracking data from the CME FedWatch tool, the market's expected probability of a 25 basis point rate cut is as high as 96%, which makes the final decision completely within the market's expectations.

This early layout suggests that potential positive impacts have been priced in before the interest rate cut, creating an environment described by analysts as “buy the expectation, sell the fact.” Although the interest rate cut has created favorable conditions for the market, traders remain cautious. The open interest in Bitcoin futures has remained stable, and there was no massive liquidation waterfall following the Fed's decision. Analysts point out that Powell's wording and the upcoming economic data are key factors that traders need to pay attention to before establishing larger positions.

Long-term outlook is optimistic, but short-term trends still need to wait.

Andrew Forson, President of DeFi Technologies, stated that the reduction in borrowing costs will ultimately lead to more capital flowing into the digital asset space. He pointed out that lower capital costs mean that the risk threshold for capital entering the digital asset space is lower. He also added that staking products and blockchain projects could become attractive alternatives to traditional bonds, while providing yield and appreciation potential.

Historical experience shows that the rebound of the crypto market after the Fed cuts interest rates often takes time. When the Fed relaxed its policy in December 2024, Bitcoin briefly soared by 5%, then entered a consolidation phase, only to see a sustained rise weeks later. Market observers expect a similar pattern may emerge this time. Powell's uncertainty regarding inflation and growth keeps short-term volatility moderate.

Tom Lee of BitMine predicted this week that if the Fed continues on a loose path, Bitcoin and Ethereum could bring “stunning returns” in the next three months. His views align with the general market expectation that once the easing cycle accelerates, liquidity-sensitive assets will perform exceptionally well.

Conclusion

The Fed's rate cut measures have created favorable conditions for the long-term development of the crypto market, but its cautious attitude has effectively suppressed the market's immediate frenzy. This event highlights the close relationship between macroeconomic policy and the performance of crypto assets. As the market continues to digest and assess this policy signal, traders are turning their attention to the Fed's October meeting to determine whether this rate cut marks the beginning of a policy shift or is merely a one-time adjustment.