Below is an analysis of how the crypto market could — and is — reacting if the Federal Reserve (Fed) cuts interest rates three times this year. Depending on the degree, speed, and market expectations, the effects can be very diverse:

🫵Main impact mechanisms

1. Capital costs decrease / liquidity increases

When the Fed cuts interest rates, borrowing costs decrease; this usually increases liquidity in financial markets. Investors tend to turn to higher-risk assets (risk-on) like stocks and crypto as yields from safe assets (e.g., bonds, bank deposits) decrease.

2. The USD weakens

Lower interest rates often reduce the attractiveness of holding USD (lower interest rates mean lower yields). Thus, assets priced in USD (like many cryptocurrencies) may be favored if the USD depreciates.

3. Market sentiment and expectations

If the market has "anticipated" the interest rate cuts (i.e., the Fed has signaled in advance, or economic data points towards a cut), then the reaction may be "priced in" — there may be a "sell-the-news" effect, meaning prices rise beforehand, but when the official news comes out, the reaction is not too strong or even sees a correction.

4. Short-term vs long-term impact

In the short term: high volatility, the "strong – then adjust" reaction is common. Investors and traders may push prices up after good news and then take profits.

In the long term: if the interest rate cutting cycle lasts, if the economy does not decline too sharply, then easier financial conditions, riskier capital flows (such as crypto) have a better chance of growing.

🫵Actual signs & current situation

Some recent events and data have reflected expectations and impacts:

The news that the Fed will cut interest rates has supported Bitcoin's upward momentum – for instance, the expectation of rate cuts is partly being priced in.

However, the crypto market after each interest cut announcement has not "exploded" — there have been positive reactions, but it has not been a stable explosion – as many remain concerned about inflation, economic risks, growth, and management policies.

For DeFi networks, smaller or higher-risk crypto projects (memecoins, lesser-known tokens) often experience greater volatility when news about rate cuts comes out.

🫵Possible scenarios if the Fed cuts 3 times this year:

Based on current experience and analysis, below are possible scenarios if the Fed actually cuts rates 3 times this year.

Scenario Short-term impact on crypto Long-term impact on crypto

Expectations confirmed, the market has "anticipated" Slight to average increase; there may be a correction after each cut if the news was priced in. High volatility. Stronger increase if the economy stabilizes, inflation decreases. New capital flows from institutional investors.

Strong unexpected cuts Strong positive reaction (rallies), but the risk of "fear of economic weakness" – if too much is cut, it may signal a recession. Some capital may withdraw from crypto if investors are concerned about risks. If the Fed maintains a balance between supporting growth & curbing inflation, crypto may grow well. If not, recession risks could pull the crypto market down.

Moderate rate cuts, but with many unclear economic or policy management risks The market reacts erratically, sometimes up, sometimes down; cautious investors; large cryptos (Bitcoin, Ethereum) prioritized over smaller altcoins. If risks are not managed (inflation, liquidity, debt), then even with rate cuts, growth may not be sustainable. Less utilized or high-risk tokens may face liquidation.

Conclusion

If the Fed cuts interest rates 3 times this year, the crypto market will likely benefit, especially if this coincides with a stable economic environment. But "instant gratification" is often not the case — that is, investors need to be patient, as the reaction immediately after each announcement may be limited if the market has already priced it in.

The reason Bitcoin remains silent after the Fed cuts interest rates

Many investors anticipated the Fed's move, so there was no FOMO (fear of missing out) sentiment, causing Bitcoin's price to stagnate when interest rates were cut.

The Federal Reserve cut interest rates for the first time this year, by 25 basis points (0.25%). Immediately after, each ounce of gold lost nearly $30 due to profit-taking, while U.S. stocks moved in opposite directions with the DJIA rising by 0.6%, while the S&P 500 and Nasdaq Composite fell by 0.1% and 0.3%, respectively.

According to Decrypt analysis, Fed Chair Jerome Powell describes interest rate cuts as a "risk management" measure rather than aimed at bolstering a weakening U.S. economy, and this may partly explain the market's indifferent response to cryptocurrency.

The reason Bitcoin remains silent after the Fed cuts interest rates

Many investors anticipated the Fed's move, so there was no FOMO (fear of missing out) sentiment, causing Bitcoin's price to stagnate when interest rates were cut.

The Federal Reserve cut interest rates for the first time this year, by 25 basis points (0.25%). Immediately after, each ounce of gold lost nearly $30 due to profit-taking, while U.S. stocks moved in opposite directions with the DJIA rising by 0.6%, while the S&P 500 and Nasdaq Composite fell by 0.1% and 0.3%, respectively.

In the cryptocurrency market, the price of Bitcoin (BTC) also did not react positively. The world's largest cryptocurrency fell from the $116,000-$117,000 range last week, quickly dropping below the $115,000 mark per unit within minutes. Since then, BTC has frequently traded at lower prices than the previous session.

The market capitalization of cryptocurrencies remains above $4 trillion, dropping less than 1% in the past 24 hours, while the average performance of the top 20 cryptocurrencies has decreased by 0.43%, according to data from CoinMarketCap. Therefore, there has been no phenomenon of FOMO (fear of missing out) from the Fed loosening its policy. The Fear and Greed Index for cryptocurrencies is currently neutral at 51 points, down 6 points from last week.

Rate cuts are often a factor that helps increase prices for risky assets. However, the market seems to have priced in this move for many weeks.

According to Decrypt analysis, Fed Chair Jerome Powell describes interest rate cuts as a "risk management" measure rather than aimed at bolstering a weakening U.S. economy, and this may partly explain the market's indifferent response to cryptocurrencies.

With a 96% chance of a 25 basis points cut already priced in before the official announcement, traders seem to implement the classic strategy of "buy the rumor, sell the news." This is a strategy where investors buy into assets when positive rumors about the market emerge and hold with the belief that prices will rise in the future, until the official information is published to take profits. This trading strategy is quite popular in risky assets like stocks, cryptocurrencies, and real estate.

The political showdown surrounding the Fed's decision has added an extra layer of uncertainty to market sentiment. Newly appointed Governor Stephen Miran - an economist supportive of President Donald Trump, who advised him during his previous term - is the only policymaker to vote against the Fed's 0.25% interest rate cut. He supported a 50 basis points cut, matching analysts' forecasts. Nevertheless, the Fed Chairman is committed to "strongly maintaining his independence."

Analysts believe that the Fed may still be hesitant about monetary policy for the remaining months of this year, depending on U.S. inflation and employment data. According to Matt Mena, a digital asset research strategist at 21Shares, the risk of revaluation is currently becoming a focal point, creating an asymmetric context for BTC.

"A 25 basis points cut is just a spark, the Fed's hesitation will pose challenges for Bitcoin in reaching new highs by the end of this year," he added.

Gerry O'Shea, head of global market research at digital asset management firm Hashdex, noted Bitcoin's "silent" reaction to the Fed's announcement but still believes that corporate demand and capital flows into ETF funds could help push BTC prices higher in the coming time. "These factors, along with market confidence in the ability to adjust interest rates, could help push Bitcoin to higher levels in the coming weeks," he predicts.