Bitcoin and Ethereum edged higher on Tuesday as traders positioned themselves ahead of the Federal Reserve’s final interest rate decision of 2025, expected on Wednesday at 2:00 p.m. ET. The meeting is widely anticipated to deliver a 0.25% rate cut, which would be the Fed’s third cut this year.
Data from CME Group shows a 90% probability of the reduction, while Polymarket bettors are also heavily leaning toward a quarter-point cut largely due to ongoing concerns about the U.S. labor market.
Crypto’s mixed reaction to rate cuts in 2025
Historically, Bitcoin tends to perform well after rate cuts because lower interest rates make non-yielding assets more attractive while often pressuring the U.S. dollar. However, 2025 has been different. Markets have reacted inconsistently to recent cuts, with Bitcoin sometimes dipping immediately after announcements.
Analysts say this shift reflects a market more focused on Jerome Powell’s tone, forward guidance, and overall liquidity conditions rather than the rate cut alone.
Despite the choppy environment, both major cryptocurrencies were showing strength late Tuesday:
- Bitcoin up 2.6%
- Ethereum up 6%
Altcoins, however, continued to lag, with several major tokens posting losses amid broader market uncertainty.
Stablecoin outflows signal caution
One of the most striking trends is the sharp decline in stablecoin balances on exchanges. Nansen data shows balances have dropped to $86 billion, the lowest since October, after peaking at $94 billion just weeks ago. The persistent outflows indicate a shift toward risk-off positioning.
This trend aligns with a broader deleveraging across the crypto market. CoinGlass data shows futures open interest falling 0.3% over the past 24 hours, while funding rates continue to flatten both signs of weakening demand in derivatives markets.
Analysts warn Bitcoin may fall after the cut
Despite Tuesday’s relief bounce, analysts caution that Bitcoin and other altcoins may decline immediately after the rate decision for three key reasons:
- The rate cut is already priced in, meaning traders may “sell the news.”
- A hawkish cut is possible, with Powell emphasizing caution or signaling fewer cuts ahead.
- Inflation concerns remain, raising the possibility that the Fed could hold rates steady or even hike again in 2026.
Rising U.S. Treasury yields with the 10-year reaching 4.18% reflect these inflation anxieties.
Tuesday’s pullback across altcoins follows warnings earlier in the week that the recent bounce may have been a dead-cat rally, where prices briefly rise before continuing a broader downtrend.
What comes next
With Bitcoin sitting near key support levels, the Fed’s communication could determine whether markets extend their recovery or revisit recent lows. Traders will be watching Powell’s language closely for hints about 2026 policy and shifts in liquidity.
