The market is increasingly convinced: the Federal Reserve will likely start cutting interest rates. Weak employment data, slowing economic growth, and even Goldman Sachs predicts 'multiple rate cuts throughout the year'. For cryptocurrencies, this could be a long-awaited 'blessing' – but what logic lies behind the opportunity? How should one prepare in advance?
1. First, understand: why does the Federal Reserve want to cut interest rates?
Interest rates are the Federal Reserve's 'economic adjustment lever'; the core purposes of interest rate cuts are threefold:
Stimulate the economy: lower borrowing costs for businesses and individuals, encourage spending and investment, and give a boost to a sluggish economy.
Weaken the dollar: a decrease in interest rates will reduce the attractiveness of dollar assets, pushing funds to other markets and alleviating the pressure of a strong dollar on exports.
Anti-recession: The current economic slowdown makes interest rate cuts a routine operation to hedge against 'stagnation risk' in advance.
In simple terms: interest rate cut = 'injecting money' into the market, and cryptocurrencies are extremely sensitive to 'increased money supply'. 2. The 3 major core benefits of interest rate cuts on cryptocurrencies have been historically validated: during the 2020-2021 Federal Reserve's quantitative easing period, Bitcoin surged from $7,000 to $69,000, and altcoins collectively skyrocketed – the influence of interest rate cuts on the crypto market has long been proven by history.
Liquidity 'flooding' into risk assets.
After the interest rate cut, the cost of bank loans decreases, and the 'idle money' in the market will increase. This money will not just stay in traditional stock markets; a portion will flow into cryptocurrencies, which are considered 'high-yield potential markets'. Just like in 2020, cheap capital flooded in, directly pushing up coin prices.A weaker dollar makes cryptocurrencies a 'substitute option'.
Interest rate cuts usually lead to a depreciation of the dollar (because the interest on holding dollars becomes less). At this time, decentralized assets like Bitcoin and Ethereum will be viewed by more people as 'tools against dollar depreciation'; just as gold rises when the dollar is weak, the 'substitute value' of cryptocurrencies will be amplified.Risk appetite warms up, bull market logic restarts.
In a low-interest-rate environment, investors are more willing to 'bet on high returns'. The bull market of 2021 is a typical example: after interest rate cuts, funds flowed from conservative assets (bonds, cash) into cryptocurrencies, not only driving up Bitcoin but also leading altcoins, DeFi, and NFTs to rise in turn. If history repeats itself, after the interest rate cuts in 2025, we may see the familiar plot of 'altcoin rotations' and 'new hotspots emerging'.
3. How should ordinary investors prepare in advance? Focus on these 4 signals.
Position strategically during dips for 'hard currencies', especially Ethereum.
During the interest rate cut cycle, institutional funds are more inclined to first buy 'high-certainty' targets. Bitcoin, as 'digital gold', will be prioritized, but Ethereum may be more worth paying attention to – its smart contract ecosystem can accommodate more institutional-level applications, and when liquidity returns, the narrative can easily be ignited.Keep an eye on 'Bitcoin dominance' to judge market trends.
In the early stages of interest rate cuts, funds may flock to Bitcoin (dominance rises); however, once the market confirms a bull market, funds will flow to altcoins (dominance decreases). If you see Bitcoin dominance starting to fall from above 50%, it may be a precursor to an altcoin explosion.Track stablecoin 'trends' to capture funding signals in advance.
The amount of stablecoins (USDT/USDC) flowing into exchanges is the most direct evidence of 'funds preparing to enter'. If stablecoins continue to flood into exchanges 1-2 months before the interest rate cut, it indicates that the market is preparing in advance, at which point one can cautiously test the waters.Don't overlook 'risk control'; an interest rate cut doesn't mean only rises without falls.
There may be 'premature speculation' before good news is released (for example, there could be a surge in the first half of 2025), and after the interest rate cut, there might be a 'realization of benefits' leading to short-term corrections. It is recommended to keep positions under 70% and reserve 30% cash to cope with volatility, especially avoid using excessive leverage.
The interest rate cut in September 2025 may be the long-awaited 'macro tailwind' for cryptocurrencies. But remember: a bull market doesn't mean 'all coins rise', but rather 'only those who are prepared can earn'. Start tracking the above signals now, lay out quality targets in advance, and maintain a risk bottom line – when the tide comes in, being in the right position is more important than anything else.
