Global cryptocurrency markets surged today as traders bet on imminent U.S. Federal Reserve rate cuts. Mixed U.S. inflation data and softer labor market numbers encouraged investors to position for a friendlier risk environment ahead of next week’s crucial Fed meeting.
Popular crypto enthusiasts reported that this renewed optimism pushed major digital assets higher. Bitcoin, the largest cryptocurrency, gained 1.29% and settled near $115,329.58 after briefly topping $116,000 overnight. Ethereum outperformed Bitcoin, jumping 2.94% to about $4,505.37. Solana led the large-cap altcoins with a 4.19% surge, reaching $232.65. These broad-based gains lifted total crypto market capitalization above US$4.01 trillion, showing strong confidence across the sector.
Economic Data Fuels Dovish Sentiment
Fresh economic reports painted a mixed picture but strengthened expectations for a dovish Fed. The headline Consumer Price Index (CPI) rose 0.4%, slightly above forecasts, while core inflation matched projections at 0.3%. Weekly jobless claims spiked to 263,000, well above the 235,000 estimate and the highest since October 2021, Blockhead noted.
Analysts say the weaker labor data gives the Fed room to cut rates. Traders are now pricing in several rate reductions before year-end, with high odds for next week’s meeting, followed by possible cuts in October and December.
Why Rate Cuts Matter for Crypto
Lower rates reduce borrowing costs and increase liquidity. That shift typically boosts non-yielding assets like cryptocurrencies, making them more appealing than traditional interest-bearing investments. In contrast, rising rates often weigh on risk assets. The current rally shows investors believe monetary easing has finally arrived.
A Fed rate cut happens when the Federal Reserve decides to lower the federal funds rate, which is the interest rate banks use to lend money to each other overnight. This rate plays a crucial role in determining how much it costs to borrow money throughout the economy, affecting everything from home mortgages to business loans. The Fed typically cuts rates to boost economic activity, particularly when growth is slowing down or there are increasing concerns about a recession.