Rate Cuts Ahead – Fed Moves Set the Stage for a Crypto Surge

October 27, 2025

The Federal Reserve is expected to announce a 25 basis point rate cut on Wednesday, 10/29 at 2:00 PM, with markets showing a high probability of another cut in December. Coupled with the possible conclusion of quantitative tightening (QT), these measures indicate that the macro liquidity environment is poised for a change. For crypto investors, liquidity has historically been the key factor influencing digital asset performance.

Key Points:

1. Rate cuts are imminent. Polymarket (betting market) and CME FedWatch show ~98% odds of a 25 bps cut for the 10/29 meeting, confirming market expectations of a Fed easing cycle.

2. Global liquidity is expanding. U.S. M2 is running ~4.7–4.9% YoY and an aggregate of major central-bank M2 readings is roughly ~6.7% YoY, signaling rising liquidity worldwide. Gold has ripped 56% YTD, highlighting renewed interest in store of value assets.

3. Policy continuity favors dovishness. Even if Chair Powell steps down, political and market pressure is likely to keep Fed policy accommodative into 2026.

The Macro Shift

Inflation has cooled to 3.0% YoY, approaching the Fed’s 2% target, while GDP growth appears modest for Q3. With the Fed likely halting up to $95B/month QT, liquidity constraints that pressured risk assets over the past three years are lifting. Historically, early easing cycles have preceded strong gains in risk assets, including Bitcoin, which surged ~180% in 12 months following the 2019 easing cycle.

Tom Lee, Fundstrat founder: “Liquidity is the oxygen for risk assets. If the Fed turns the tanks back on and ends QT, both equities and crypto will breathe easier.”

Liquidity and the Debasement Trade

The debasement trade has persisted throughout 2025. With U.S. M2 running ~4.7–4.9% YoY and an aggregate of major central-bank M2 readings roughly ~6.7% YoY, and real yields negative at -0.4%, investors have been rotating into assets like gold (+56% YTD) and to a lesser extent crypto.

Nonetheless, cryptocurrency continues to be a high-beta representation of this trend. Spot Bitcoin ETFs contain over $150 billion, and Ethereum ETFs hold over $28 billion. On-chain data indicates declining BTC reserves on exchanges, while custodied balances are increasing, highlighting institutional investments flowing into structured channels.

“Bitcoin and gold are the two sides of the same coin, expressions of scarcity in an era of policy overreach.” — Paul Tudor Jones

Sentiment and Market Setup

Market sentiment supports the bullish case. Polymarket odds favor Fed easing, and spot crypto ETF flows totaled $4.7B in October so far, while stablecoin supply rose 4% MoM, a proxy for deployable crypto liquidity. Leverage remains moderate, suggesting a liquidity-driven rally, not speculative excess. Past easing cycles in 2019 and 2020 show that rate cuts plus QT cessation often precede major crypto outperformance.

Positioning Crypto for Fed Rate Cuts

Investors can take steps:

1. Own liquidity proxies. Bitcoin, Ethereum, and spot ETFs provide compliant exposure.

2. Track flow indicators. Monitor ETF inflows, stablecoin supply, and M2 trends.

3. Diversify scarcity assets. Include gold, BTC, and select infrastructure plays to express the debasement trade.

4. Stay nimble. Early-cycle rallies can be uneven; watch funding rates and position sizes.

5. Think in liquidity regimes. Easing cycles last multiple quarters, early positioning often captures the best risk-adjusted returns.

Bottom Line

Macro liquidity is shifting. With U.S. and global M2 expanding, gold ripping, rate cuts in play, and the Fed ending QT, the debasement trade persists, and crypto remains its highest-beta expression. For investors, the takeaway is simple. Follow liquidity, not headlines. Early positioning could capture outsized returns as the next cycle unfolds.

This article is for informational purposes only and does not constitute investment advice.

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