Fed Cuts Rate by 50bps, Surprises Market With Dovish Dot-Plot – Here’s How Bitcoin (BTC) Reacted  

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Joel Frank

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Joel Frank

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Since graduating with a degree in economics from the University of Birmingham in 2018, Joel has worked as a financial market/cryptocurrency analyst. He firmly believes that emerging crypto technology…

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Last updated:

September 18, 2024 15:55 EDT

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Bitcoin (BTC) saw choppy, albeit bullish, price action on Wednesday after the Fed cut rates in the US by 50bps to 4.75-5.0% and signaled more interest rate easing than the market had anticipated in 2025 in its updated dot-plot.

The price of Bitcoin swung between $60,000 and $61,000 after the Fed rate cut announcement.

Going into this week’s meeting, Wall Street had been split over whether the Fed would cut interest rates for the first time since 2020 by 25 or 50bps.

So, the decision to opt for a larger 50bps cut to the target range of the federal funds rate would have surprised some market participants.

But that wasn’t the only dovish aspect of the policy announcement.

The Fed’s graphic showing the interest rate forecasts of its members called the dot-plot, showed that the median Fed policymaker expects a further 150bps in rate cuts by the end of 2025.

New economic projections were also released. The Fed expects inflation to continue falling towards 2.0% and for the unemployment rate to stabilize around its current level between now and 2026.

In his post-policy announcement press conference, Fed Chair Jerome Powell reiterated the Fed’s view that the US economy would remain robust.

Fed Rate Cut Fuelled Rally in Crypto Incoming?

The ingredients for a Fed-fueled rally in crypto markets appear to be falling into place.

The Fed looks intent on aggressively lowering interest rates but remains upbeat on the economy.

That’s potentially a “goldilocks” scenario for risk assets, and major US equities could vault to fresh record highs as a result.

Meanwhile, the US dollar and US yields should probably continue to subside. This is a potentially very bullish macro backdrop for Bitcoin.

As long as US recession fears don’t suddenly surge back, the stage could be set for BTC heading back towards $70,000 in the coming weeks.

Of course, US election uncertainty remains high. Polymarket has Democrat Presidential nominee Kamala Harris as the slight favorite.

While a victory for Republican nominee and former President Trump might be better for the market in the short-term, it likely won’t matter too much in the long run, with Harris potentially open to a softer stance on the crypto industry than the current Biden administration.

Major market rallies usually follow US Presidential elections as uncertainty clears up.

The delayed-bullish impact of the BTC halving could also come into play in the final quarter.