Expected Fed rate cut would be bullish for Bitcoin

THE US Federal Reserve is increasingly likely to cut interest rates, I believe, and if it does, the implications for Bitcoin could be significant: potentially higher prices, increased institutional inflows, and a surge in demand.

February’s inflation report has given policymakers the cover they need. With CPI cooling to 2.8% year-on-year and core inflation finally bending lower, the Fed has every reason to act. But inflation’s direction is not entirely clear.

Services costs are easing, yet wages are rising at a faster-than-expected pace. Meanwhile, key industries are losing momentum, and inflation expectations have surged in recent weeks.

On top of this, Trump’s on-off, erratic tariff policies further complicate the picture.

Protectionist policies push up consumer prices while simultaneously weighing on economic growth.

This combination - a resurgence in inflationary pressures alongside a slowdown - puts the Fed in a precarious position. Policymakers may need to act sooner rather than later to prevent deeper economic damage.

If rate cuts do materialize, as I think they will, Bitcoin could be positioned as one of the biggest beneficiaries.

A rate-cut cycle would mean a flood of liquidity is coming. With borrowing costs dropping, capital moves faster. Risk assets rally. Markets reprice the future. We saw it in 2020 and 2021 when central banks pumped trillions into the system. That liquidity helped propel Bitcoin to then all-time highs.

This time, while the circumstances are different, the principle remains the same: easier monetary policy would fuel demand for Bitcoin.

For institutional investors, this shift would likely to be impossible to ignore.

Bitcoin ETFs have already drawn billions in inflows, and if the Fed moves to cut rates, the next leg higher could be fuelled by capital that was previously sitting on the sidelines.

As rates fall, the opportunity cost of holding cash skyrockets. Funds need exposure to assets with asymmetric upside, and Bitcoin - an asset with fixed supply, expanding adoption, and growing mainstream acceptance - could be a prime candidate.

Rate cuts tend to hit the dollar where it hurts. As yield differentials narrow, global capital diversifies away from the greenback.

This isn’t speculation, it’s a pattern we’ve seen repeatedly in market cycles. If the Fed pivots, the dollar could soften, and alternative assets could gain strength.

Bitcoin, often referred to as digital gold, has historically responded to dollar weakness with decisive moves higher. This could be especially true in a world where geopolitical instability, trade tensions, and inflationary fears remain unresolved.

Investors need hedges, and Bitcoin provides one without counterparty risk, without centralized intervention, and with the most provable scarcity of any asset class.

Bitcoin’s days as a fringe asset are over. The approval of spot ETFs has fundamentally changed the market structure. If the Fed shifts its stance, major players could allocate more aggressively.

Pension funds, asset managers, and hedge funds understand that Bitcoin is no longer an experiment - it’s a high-performing asset in an era where traditional portfolios are being reshaped.

Some of the world’s largest financial institutions have already planted their flags in Bitcoin. If the cost of capital declines, allocations are likely to ramp up. This wouldn’t be retail FOMO. It would be the recognition that Bitcoin, alongside equities and other risk assets, stands to benefit from the macroeconomic shifts that are now taking shape.

Bitcoin has never gone through a sustained rate-cut cycle with institutional adoption at scale.

The last time the Fed eased, Bitcoin was still much more of an emerging asset. Now, it has matured. Its market structure has evolved. Liquidity has deepened. If rate cuts materialize, the next bull cycle could look very different from the last.

A pivot by the central bank of the world’s largest economy would mean risk is back on. It would mean capital seeks return in non-traditional places. It would mean Bitcoin reclaims its place as a premier asset in the global financial system.

A repricing event could be inevitable - those positioned early would reap the benefits.

To my mind, Bitcoin’s next leg higher isn’t just a possibility, it’s a strong probability if the Fed slashes rates in response to rapidly evolving economic shifts on the US – which can be reasonably expected as King Trump continues to create uncertainty not seen since the financial crash of 2008.

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Nigel Green, deVere Group CEO and founder

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