Lower Interest, Bigger Wagers: Fed's Looser Policy Drives Crypto Surge

The likelihood of the U.S. Federal Reserve reducing interest rates in September 2025 has surged to 92.2%, as indicated by the CME FedWatch Tool. This increased expectation is fueled by disappointing labor market results and milder effects from recent tariffs, generating

among cryptocurrency enthusiasts. Experts believe that lower borrowing costs could prompt more investment into digital currencies, potentially lifting demand and prices throughout major crypto markets.

Investor sentiment has changed dramatically since early July, when chances of a September rate cut were just 41%. Growing confidence in a rate reduction has been further bolstered by projections from prominent

like , which now sees three separate 25-basis-point rate cuts in 2025, aiming for a target range of 3.00% to 3.25%. Other major players, including , , and , have also indicated expectations for rate decreases this year, with UBS projecting a total cut of 100 basis points.

The potential impacts of these rate reductions on the cryptocurrency sector are varied. Historical records indicate that declining interest rates generally make non-interest-bearing assets like

(BTC) more attractive, channeling more capital toward crypto assets. For example, during the rate-cutting cycle in 2020, Bitcoin reached all-time highs. Analysts now anticipate that, if the cuts occur as predicted, Bitcoin could climb to the $70,000–$75,000 range by the end of the year, driven by ETF inflows and favorable macroeconomic conditions.

Both Ethereum (ETH) and

(SOL) are also seen as likely beneficiaries of the Fed’s more accommodative approach. could potentially see its value soar by 150% to reach $4,500 in the fourth quarter of 2025, as institutional participation and DeFi innovation accelerate. Solana has upgraded its network with features like the Alpenglow protocol, boosting its technical performance and establishing it as a leading high-beta altcoin in times of abundant liquidity. Previous performance during similar periods of Fed easing—such as in 2024—shows just how responsive Solana can be to economic signals.

Nevertheless, there are risks to consider. Unexpected changes in Fed policy or sudden inflation spikes could limit gains or spark market turbulence. Ongoing internal issues at the Federal Reserve, such as the legal dispute concerning Governor Lisa Cook’s removal, have raised questions about the institution’s independence and its ability to steer policy. These factors may introduce uncertainty into the Fed’s future communication, shaping how markets and investors react.

Beyond U.S. monetary decisions, central banks around the world are also taking steps that could impact digital asset markets. The Bank of England (BOE), for instance, recently reduced its key rate to 4%, its lowest point since March 2023. This move helped fuel a rally in digital currencies such as

, Ethereum, and Solana, each gaining as much as 6.87% in just one day. These global economic changes highlight the deepening connections between international finance and the growing sensitivity of crypto markets to central bank actions.

Overall, these trends indicate that cryptocurrencies are becoming increasingly intertwined with mainstream financial systems, with institutional involvement and regulatory clarity proving crucial. As the Fed adopts a more accommodative stance in 2025, investors are paying close attention to the resulting market responses. Anticipated increases in liquidity and investor risk appetite may further accelerate the move toward digital assets, especially in areas like decentralized finance and higher-yield alternatives.