Bitcoin Soars to $118K on Fed Rate Reduction as Crypto Markets Turn Bullish

The U.S. Federal Reserve’s decision to lower interest rates by 25 basis points on September 17, 2025, proved to be a crucial turning point for the crypto sector, as

soared to an all-time high of $118,000 shortly after. The move, which markets had been expecting, indicated a significant shift in policy as growth slowed and inflation remained stubbornly high. With the Fed’s key interest rate now ranging from 3.75% to 4.00%, the policy change loosened financial conditions and weakened the dollar, fostering a supportive climate for risk assets including Bitcoin and other digital currencies.

This shift was immediately reflected in financial markets. The U.S. Dollar Index (DXY) dropped in advance of the announcement, and major indices like the S&P 500 and Nasdaq hit new peaks, hinting at market optimism regarding the stimulative impact of the rate cut. Bitcoin, often considered a shield against fiat currency weakness, seemed to gain directly from the softer dollar. The same trend was seen across the crypto space, as leading altcoins also posted strong gains ahead of the Fed’s news.

The rate cut also sparked heightened activity and speculation in crypto derivatives. Open interest and funding rates for perpetual contracts experienced notable fluctuations, revealing that traders were taking on more leveraged positions. The Altcoin Season Index—a measure of how altcoins are performing relative to Bitcoin—rose into the 60s, suggesting capital was shifting toward smaller coins. Nevertheless, experts warn that the initial rate cut in a new cycle can introduce volatility, and the market—especially altcoins—may still be vulnerable to sharp corrections.

Opinions among market participants were deeply split. Optimistic analysts pointed to increased liquidity and growing institutional investment as key reasons for further gains in Bitcoin and the wider crypto market. Steady inflows into spot ETFs ahead of the rate cut were also viewed as a positive sign for demand. On the other hand, more cautious voices flagged the risk of stagflation, especially since the Fed continues to stress its concern about inflation. The triple witching event in stock markets added another level of unpredictability; historical patterns show an average decline of -1.17% in the week following such expirations, which could mean a 5–8% drop in Bitcoin and potentially larger losses in the altcoin sector.

Institutional response stood out as well. The SEC’s green light for the

ETF—which combines PENGU tokens with NFTs—demonstrated increasing mainstream interest in meme tokens and NFT-related digital assets. The SEC’s approval led to a 23% surge in PENGU’s value, highlighting growing optimism about crypto regulation. This also underscored the changing relationship between traditional finance and the crypto market, with more regulated investment products aiming to connect the two worlds.

Looking forward, the Fed’s messaging at its post-meeting press conference will be critical for investor sentiment. Although the rate cut brought immediate relief, any indications of caution or persistent inflation concerns could dampen enthusiasm. Furthermore, future SEC rulings on broader crypto ETFs—especially those linked to Bitcoin and

—could significantly affect crypto prices in the coming months. With inflation remaining high and the job market still fragile, ongoing policy uncertainty continues to pose a significant risk for the cryptocurrency industry.