Bitcoin and Markets React to U.S. Fed’s Rate Cut with Optimism
In a widely anticipated move, the U.S. Federal Reserve reduced its benchmark interest rate by 25 basis points on Wednesday, adjusting the federal funds target range to 4.25%–4.50%. This latest reduction follows a larger 50 basis point cut delivered in September, signaling the central bank’s continued effort to fine-tune monetary policy amid evolving economic conditions.
“In support of its goals, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent,” the Federal Open Market Committee (FOMC) stated. “Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.”
The FOMC indicated it would carefully monitor incoming data and broader financial developments before considering additional changes. “In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement continued. It emphasized that future policy decisions will account for factors such as labor market health, inflation trends, and global economic shifts. Federal Reserve Chair Jerome Powell is scheduled to address reporters at 2:30 p.m. ET.
Bitcoin Futures Signal Market Confidence
Bitcoin prices edged upward immediately after the rate announcement. Derivatives metrics also pointed to heightened optimism, with CME bitcoin futures open interest approaching record levels. According to a report by K33 Research, basis premiums for bitcoin and ether futures surged to about 16.4% amid a recent breakout, lifting market sentiment. Analysts noted that the futures market is experiencing contango—where futures contracts trade above spot prices—at levels not seen since November 2023. The December CME bitcoin futures contract currently represents an open interest of 113,480 BTC, reflecting strong institutional participation.
The rising CME basis premium underlines a positive environment for bitcoin. Although QCP Capital analysts acknowledged limited bearish indicators on the spot market, they highlighted the cautious tone of the options landscape, where put options still outnumber calls. This suggests traders remain mindful of downside risks, even as spot prices climb. “The options market offers a note of caution, with a continued skew toward puts over calls even as spot continues to make new highs—perhaps signaling a preference for hedging rather than aggressively chasing the rally,” the QCP team noted.
Analysts at QCP Capital also underscored a supportive regulatory shift: The U.S. Financial Accounting Standards Board (FASB) recently approved fair value accounting rules for bitcoin and other digital assets. This change allows companies to report fair value gains directly in their net income, potentially encouraging more corporations to hold bitcoin. “With a supportive regulatory environment driving the recent rally, this could spark a cross-asset feedback loop, where firms holding bitcoin in their treasuries find it easier to raise funds—potentially fueling institutional demand for bitcoin in a non-linear fashion,” said the QCP analysts.
Equities and Commodities React
U.S. equities responded positively to the Fed’s move. During mid-day trading on Thursday, the S&P 500 advanced by 0.59%, and the Nasdaq Composite jumped 1.33%. However, the Dow Jones Industrial Average dipped slightly, slipping by about 0.015%. Meanwhile, the CBOE Volatility Index (VIX), a gauge of anticipated volatility in the S&P 500, receded by 6% to 15.28 points, reflecting calmer sentiment.
Elsewhere, gold prices climbed 0.98% over the past 24 hours to around $2,693.43 per ounce, signifying steady interest in safe-haven assets even amid improved market confidence. At the time of publication, bitcoin was trading near $105,317, according to The Block’s price data, underscoring the cryptocurrency’s robust response to the latest rate decision.