Dovish Fed Boosts Cryptos, Dollar Strength Could Cap Gains
Major cryptocurrencies, led by Bitcoin, have resumed a steady upward move following Wednesday’s Federal Reserve rate cut, although the resilience of the U.S. dollar may limit upside.
The Fed cut its benchmark rate by 25 basis points to 4% and signaled the possibility of faster easing over the next 12 months, providing a lift to risk assets.
Bitcoin and Ethereum Lead the Rally
Bitcoin (BTC) surged past $117,900, the highest level since mid-August, breaking out of a sideways pattern and continuing its recovery from early September lows near $107,200. As of writing, BTC was up nearly 1% over 24 hours.
Ethereum (ETH) rose 2.7%, remaining confined within a four-week contracting triangle. Other major tokens—including Dogecoin (DOGE), Solana (SOL), and BNB—gained over 4%, while XRP climbed roughly 3%, building momentum after a bullish descending triangle breakout.
Institutional Activity Supports Solana and XRP
Solana briefly reached $245, nearing its weekend high, following CME Group’s announcement that SOL and XRP options will debut on October 13. These new products are expected to increase institutional participation and enable more effective exposure management.
“The Fed’s dovish stance has created an asymmetric setup for Bitcoin,” said Matt Mena, crypto research strategist at 21Shares. “While the 25bps cut sparked the rally, the trajectory implied by the Fed’s dot plot could drive BTC to new highs by year-end. Bitcoin may exceed $124,000, and Ethereum could surpass $5,000.”
Dollar Resilience Could Limit Upside
Despite dovish projections, the Dollar Index (DXY) rebounded to 97.30, recovering from its July 1 low of 96.37. Powell’s caution against rapid successive cuts, combined with ongoing balance sheet runoff and persistent inflation, underpins the dollar’s strength. A stronger DXY could tighten financial conditions, potentially weighing on BTC and other risk assets.
Tail Risk Hedging Increases
Crypto financial platform BloFin reported rising demand for tail risk protection—hedges against rare, high-impact market events. Short-dated BTC put spreads have surged, signaling growing concern among sophisticated market participants about potential downside risk.
