Fed's Unclear Messages: Prospects of Rate Reduction and Cautious Stance Cause Bitcoin to Drop

The U.S. Federal Reserve’s decision to lower rates by 25 basis points on September 17, 2025, did not

a persistent surge, as the cryptocurrency slipped 4.6% to $101,300 after the announcement Bitcoin Price Drops to $100.3K After Fed Rate Cut and Powell’s Revised 2025 Inflation Outlook [ 5 ]. This initial rate cut of 2025 came with an updated inflation outlook and a cautious message from Fed Chair Jerome Powell, which curbed market enthusiasm. The Fed raised its inflation forecast for 2025 to 2.5% from the previous 2.1% and reduced its expected rate cuts for the year to two, down from the earlier projection of three Federal Reserve Lowers Interest Rates by 0.25 Percentage Points in 2025 [ 9 ]. This shift away from the previously expected dovish stance caught investors off-guard and led to a swift exit from risky assets.

Bitcoin’s movement mirrored the conflicting signals from the central bank. Although the quarter-point cut initially softened the U.S. dollar—a factor that often benefits Bitcoin—the rally quickly lost steam. The cryptocurrency had hovered around $115,000 before the Fed’s decision, with liquidation pressures between $115,000 and $114,000 adding to the downward move Bitcoin Price Stalls Near $115K Ahead of Fed Rate Cut Decision [ 4 ]. Following the announcement, Bitcoin fell back to $100,300, wiping out earlier advances and exposing fragile investor confidence. The larger crypto market, with a valuation of $4.12 trillion, also experienced a pullback, as

and other altcoins lagged behind, despite some niche tokens posting small gains Bitcoin Price Stalls Near $115K Ahead of Fed Rate Cut Decision [ 4 ].

The Fed’s new inflation projections and Powell’s stress on a “risk management cut” highlighted the central bank’s efforts to balance inflation control with job market support Fed Meeting Today: Live Updates - CNBC [ 8 ]. Powell stated that the inflation impact from the Trump-era tariffs was “less severe and slower” than previously thought, but also cautioned about possible long-term challenges. This uncertainty left traders unsure about how quickly rates might be cut in the future. The Fed’s economic outlook now points to a median estimate of two further cuts in 2025 and only one in 2026, which is less aggressive than what many traders anticipated Federal Reserve Lowers Interest Rates by 0.25 Percentage Points in 2025 [ 9 ]. Analysts attributed Bitcoin’s post-Fed decline to this uncertainty, which increased market volatility and drove more investors to hedge.

Institutional interest in Bitcoin, supported by ETF inflows and favorable macroeconomic conditions, continues to be an important pillar. U.S.-based spot Bitcoin ETFs have drawn over $14.8 billion in assets, strengthening demand from institutions and corporate buyers. Nevertheless, the recent drop in price points to fading retail participation, especially from South Korea—a region that has historically driven significant retail activity. The Korea Premium Index, which reflects the price gap between Korean and global exchanges, turned negative, indicating weak local demand. In contrast, the Coinbase Premium Index, tracking U.S. investor activity, moved higher as institutions continued to accumulate Bitcoin. This contrast signals a shift in market structure, with U.S. exchanges now playing a bigger role in price setting.

Looking forward, Bitcoin’s future will depend on how effectively the Fed navigates between inflationary challenges and job market stability. Should the central bank adopt a more accommodative stance and the dollar weaken, a renewed rally could follow as capital moves into riskier assets. On the other hand, continued hawkish signals or unexpected inflation could spark further sell-offs. Investors are now focused on upcoming economic reports and the FOMC meetings in October and December, where clearer policy direction will be essential. For now, Bitcoin’s sideways movement near the $100,000 level shows a market in wait-and-see mode, as both bullish and bearish investors prepare for the next major development.