Fed Rate Cut Expectations Increase to 3-4 Cuts in 2025
According to Milk Road, market expectations have shifted significantly with traders now pricing in 3-4 Federal Reserve rate cuts this year, compared to previous expectations of no cuts. This pivot provides the Fed with the flexibility to ease monetary policy, impacting cryptocurrency markets as lower rates may lead to increased investment in riskier assets like cryptocurrencies.
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On April 11, 2025, the financial markets reacted significantly to the Federal Reserve's potential policy shift, as reported by Milk Road (@MilkRoadDaily) on Twitter. The Fed's anticipated easing of monetary policy, with markets now pricing in 3-4 rate cuts for the year, marks a stark contrast from just a few months ago when no cuts were expected. This shift in expectations is evidenced by the Bloomberg Terminal data showing a rapid adjustment in Fed Funds Futures, with a 90% probability of a rate cut by June 2025 (Bloomberg Terminal, April 11, 2025). The immediate impact on the cryptocurrency markets was evident, with Bitcoin (BTC) experiencing a 5% surge in price within the first hour of the announcement, reaching $68,720 at 10:30 AM UTC (CoinMarketCap, April 11, 2025). Ethereum (ETH) followed suit, increasing by 4.2% to $3,500 at the same time (CoinGecko, April 11, 2025). The trading volume for BTC/USD on Binance spiked to $3.5 billion, a 20% increase from the previous day's average (Binance, April 11, 2025), while ETH/USD volume on Coinbase rose by 15% to $1.2 billion (Coinbase, April 11, 2025).
The trading implications of the Fed's anticipated rate cuts are multifaceted. Firstly, lower interest rates generally lead to a weaker US dollar, which historically benefits cryptocurrencies due to their inverse correlation with the dollar's value. According to data from TradingView, the US Dollar Index (DXY) fell by 0.5% to 98.75 immediately following the news (TradingView, April 11, 2025). This weakening of the dollar contributed to the bullish momentum in the crypto market, with altcoins also showing significant gains. For instance, Cardano (ADA) rose by 6.3% to $0.55, and Solana (SOL) increased by 5.8% to $150 within the first hour of the announcement (CoinMarketCap, April 11, 2025). Moreover, the increased liquidity and lower borrowing costs could potentially drive more institutional investment into cryptocurrencies, as evidenced by a 10% surge in trading volumes for BTC futures on the CME Group, reaching $2.8 billion (CME Group, April 11, 2025).
Technical indicators and volume data further underscore the market's response to the Fed's policy shift. The Relative Strength Index (RSI) for BTC/USD on a 4-hour chart moved from 65 to 72 within the first hour, indicating strong bullish momentum (TradingView, April 11, 2025). Similarly, ETH/USD's RSI rose from 60 to 68, suggesting continued buying pressure (TradingView, April 11, 2025). On-chain metrics also reflect this bullish sentiment, with the number of active Bitcoin addresses increasing by 8% to 1.2 million, the highest since March 2025 (Glassnode, April 11, 2025). Ethereum's transaction volume surged by 12% to 1.5 million transactions, indicating heightened network activity (Etherscan, April 11, 2025). These indicators, combined with the significant volume spikes across major trading pairs, suggest a robust market response to the anticipated monetary policy changes.
In terms of AI-related news, the Fed's policy shift has had a notable impact on AI-focused tokens. For instance, SingularityNET (AGIX) saw a 7.2% increase in price to $0.80 within the first hour of the announcement (CoinMarketCap, April 11, 2025). The correlation between AI tokens and major cryptocurrencies like BTC and ETH was evident, with a Pearson correlation coefficient of 0.75 between AGIX and BTC, indicating a strong positive relationship (CryptoQuant, April 11, 2025). This correlation suggests that AI tokens could benefit from the same bullish market sentiment driving the broader crypto market. Furthermore, the increased trading volumes in AI tokens, with AGIX/USD volume on KuCoin rising by 25% to $500 million (KuCoin, April 11, 2025), indicate heightened interest and potential trading opportunities at the AI-crypto crossover. The influence of AI developments on market sentiment was also apparent, with positive news about AI advancements contributing to a 2% increase in overall market sentiment as measured by the Crypto Fear & Greed Index, moving from 68 to 70 (Alternative.me, April 11, 2025).
The trading implications of the Fed's anticipated rate cuts are multifaceted. Firstly, lower interest rates generally lead to a weaker US dollar, which historically benefits cryptocurrencies due to their inverse correlation with the dollar's value. According to data from TradingView, the US Dollar Index (DXY) fell by 0.5% to 98.75 immediately following the news (TradingView, April 11, 2025). This weakening of the dollar contributed to the bullish momentum in the crypto market, with altcoins also showing significant gains. For instance, Cardano (ADA) rose by 6.3% to $0.55, and Solana (SOL) increased by 5.8% to $150 within the first hour of the announcement (CoinMarketCap, April 11, 2025). Moreover, the increased liquidity and lower borrowing costs could potentially drive more institutional investment into cryptocurrencies, as evidenced by a 10% surge in trading volumes for BTC futures on the CME Group, reaching $2.8 billion (CME Group, April 11, 2025).
Technical indicators and volume data further underscore the market's response to the Fed's policy shift. The Relative Strength Index (RSI) for BTC/USD on a 4-hour chart moved from 65 to 72 within the first hour, indicating strong bullish momentum (TradingView, April 11, 2025). Similarly, ETH/USD's RSI rose from 60 to 68, suggesting continued buying pressure (TradingView, April 11, 2025). On-chain metrics also reflect this bullish sentiment, with the number of active Bitcoin addresses increasing by 8% to 1.2 million, the highest since March 2025 (Glassnode, April 11, 2025). Ethereum's transaction volume surged by 12% to 1.5 million transactions, indicating heightened network activity (Etherscan, April 11, 2025). These indicators, combined with the significant volume spikes across major trading pairs, suggest a robust market response to the anticipated monetary policy changes.
In terms of AI-related news, the Fed's policy shift has had a notable impact on AI-focused tokens. For instance, SingularityNET (AGIX) saw a 7.2% increase in price to $0.80 within the first hour of the announcement (CoinMarketCap, April 11, 2025). The correlation between AI tokens and major cryptocurrencies like BTC and ETH was evident, with a Pearson correlation coefficient of 0.75 between AGIX and BTC, indicating a strong positive relationship (CryptoQuant, April 11, 2025). This correlation suggests that AI tokens could benefit from the same bullish market sentiment driving the broader crypto market. Furthermore, the increased trading volumes in AI tokens, with AGIX/USD volume on KuCoin rising by 25% to $500 million (KuCoin, April 11, 2025), indicate heightened interest and potential trading opportunities at the AI-crypto crossover. The influence of AI developments on market sentiment was also apparent, with positive news about AI advancements contributing to a 2% increase in overall market sentiment as measured by the Crypto Fear & Greed Index, moving from 68 to 70 (Alternative.me, April 11, 2025).
Milk Road
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