The Federal Reserve is expected to cut interest rates on Sept. 17, for the first time in nine months. The last time the Fed cut rates was back in Dec 18, 2024, with a 25 basis point (bps).

However, in the Jackson Hole Speech dated Aug. 22, Federal Chair said, "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance", hinting at a rate cut.

While the anxiety is felt within the equity markets, crypto markets are also feeling the heat. With three distinct scenarios on the table, investors are holding their breath, wondering which path the Fed will choose and what it could mean for their digital assets.

A half-percentage-point cut would be a large enough cut to indicate that the Federal Reserve is not happy with slowing growth or stress in the financial system. For crypto in general, a lower cost of capital can often lead to a rally.

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Bitcoin and Ethereum would spike, and even higher beta tokens like Solana could go up faster, but there is a danger that such a large cut could create some nervousness among investors about the underlying economy being worse than expected, which sets up a short-term volatility cliff before the markets gather themselves again.

The base scenario, which traders generally anticipate, is a quarter-point cut. It would signal the start of a fresh cycle of easing. With over $7 trillion in money-market funds, the stakes are high.

Some of that money might be diverted to riskier assets due to lower yields there.

In the cryptocurrency space, that probably means new investments in yield-bearing tokens, DeFi platforms, and stablecoins. The two stocks that might see the largest increase are Ethereum and Solana, which trade similarly to growth tech stocks.

The markets would be taken aback and given a clear indication that inflation is still a concern if the Fed kept interest rates unchanged. At least temporarily, such a decision might lead to a sell-off in stocks and cryptocurrency. The dollar would likely appreciate, putting pressure on Bitcoin, as it has in the past.

Retail Sales remained robust yesterday and so that should rule out 50bps cut tonight.
25 bps cut looks nailed on and should actually be the best result for risk assets #BTC & #Crypto pic.twitter.com/n9D3Avb8g6

— Matthew Dixon - Veteran Financial Trader (@mdtrade) September 17, 2025

Matthew Dixon, a veteran trader and analyst, states that the best situation for the markets would be to avoid a rapid 50 bps cut and then move to a slow easing. He believes this would push Bitcoin to new highs, and the latest retail sales numbers indicate no evidence of a panic sell-off in the market.

Trading firm QCP analysts state that Fed easing appears to be supportive of risk assets, but also say market strength may be under "caution and aggression" without any solid macro data.

However, inflation, deficits, and geopolitical risks still exist. They see upside options on the table if cuts happen as predicted, but also warned that valuations are stretched and volatility is likely.

At press time, Bitcoin was trading at $115,589.87, up 1.27% over the last week, as per Kraken. The total crypto market cap stands at $4.02 trillion.

Edited by: Mehab Qureshi

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This story was originally reported by TheStreet on Sep 17, 2025, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.