Market update - September 19th, 2025

A cautious first rate cut

Bitcoin has reacted cautiously to the Federal Reserve’s first rate cut since December, with prices holding flat over the past three months and volatility compressing to around 26%. Unlike previous easing cycles, this move has not produced a sharp breakout, suggesting that markets do not view the Fed’s pivot as a clear inflection point. Futures markets still toy with the idea of three cuts this year, but the subdued response indicates investors remain uncertain about the depth and durability of the easing cycle. For now, Bitcoin’s price action reflects a market waiting for clarity on whether this is the start of a sustained dovish turn or simply a modest recalibration.

A stronger confirmation is needed

The Fed lowered the federal funds target range by 25 basis points to 4.0%–4.25%, a widely expected move, with new Governor Stephen Miran dissenting in favor of a larger 50-bp cut. In the updated dot plot, the median participant now projects an additional 50 bps of cuts this year — more than in the last version — while maintaining the path of 25-bp reductions in both 2026 and 2027. Yet the distribution of projections underscores significant disagreement within the committee: nine participants anticipate two further cuts in 2024, two expect only one, six see none at all, and one projects as much as 125 bps of easing in 2025. One dot even implied higher rates by year-end, interpreted as a “silent dissent” likely from Cleveland Fed President Beth Hammack.

The Summary of Economic Projections added to the mixed picture. While policymakers raised their growth estimates for 2025 and lowered unemployment forecasts, they also flagged greater downside employment risks and acknowledged that core inflation is likely to remain persistently higher than previously expected. This combination creates a policy paradox: officials foresee stronger growth and tighter labor markets, yet still signal the need for more cuts. We interpret this as the Fed adopting a more dovish reaction function, easing policy despite lingering inflation concerns. For Bitcoin, this shift underscores its role as a hedge against monetary debasement — but the muted market response shows investors are still waiting for stronger confirmation that the Fed is embarking on a sustained easing cycle.