The Federal Reserve has announced a 0.25% benchmark interest rate cut, lowering the target range to 3.75%–4%. This move, widely anticipated by markets, follows a series of rate holds and marks the second reduction since September 2025, when the Fed implemented its first rate cut of the year. The primary goal of reducing borrowing costs is to stimulate spending and investment among consumers and businesses, though some analysts view such cuts as an indicator of underlying economic weakness.

Bitcoin’s price reacted swiftly to the news. After trading at $116,000 yesterday, it dipped to just under $111,000 earlier today before experiencing a modest rebound to the high $111,000s following the Fed’s announcement. It is currently trading at $111,470. Historically, Bitcoin has shown sensitivity to monetary policy shifts, for instance, in March 2020, it plunged nearly 39% after emergency rate cuts, before mounting a strong recovery. More recently, however, its response to the September 2025 rate cut was relatively muted, suggesting markets may have already priced in similar policy adjustments. In a closely related development, Federal Reserve Chair Jerome Powell confirmed that the central bank is nearing the end of its Quantitative Tightening (QT) program, with reports indicating the process could end by December. This revelation carries major implications for risk assets, including Bitcoin.

Quantitative Tightening refers to the Fed’s strategy of shrinking its balance sheet and reducing market liquidity, operating in contrast to Quantitative Easing (QE), which expands the balance sheet to stimulate economic growth. QT typically involves selling government bonds or allowing them to mature without reinvestment, which increases bond supply, raises yields, and subsequently drives up borrowing costs for consumers and businesses. The policy was introduced in 2022 to help curb inflation and prevent economic overheating, allowing nearly $1 trillion in securities to mature.

While effective at controlling inflation, QT carries inherent risks such as market volatility and potential economic instability. The anticipated end of QT signals a halt to liquidity drainage, potentially freeing up capital to flow into risk-sensitive assets like Bitcoin and other cryptocurrencies, which could bolster their valuations. Powell had previously hinted at this transition, though earlier uncertainty caused by the government shutdown had complicated the outlook.

Broader macroeconomic signals, including cooler-than-expected consumer price inflation last week and a slowing labor market, have reinforced expectations for today’s rate cut, and possibly more reductions before year-end. Lower interest rates generally boost risk appetite by reducing yields on cash and bonds, thereby increasing liquidity.

Despite signs of weakness in the U.S. labor market, such as record-high average job search durations—institutional demand for Bitcoin remains strong. Bitcoin ETFs have continued to see consistent net inflows, with $202.4 million added on Tuesday alone, reflecting growing confidence among professional investors. From a technical standpoint, Bitcoin remains above a rising trendline that dates back to May. Immediate resistance is observed at $114,500, while support lies at $112,000. A breakout above resistance could target $120,000, whereas a drop below support might trigger a pullback toward $106,500. As the Federal Reserve’s policy decisions continue to unfold, Bitcoin remains positioned at a critical intersection of macroeconomic shifts, market structure, and investor sentiment, where every central bank move reverberates through the evolving digital asset landscape.