#打榜优质内容# The Fed is about to cut interest rates: Favourable Information for the crypto market, but the politicization of the Fed hides uncertainties.

The Fed's interest rate cuts are coming, which is likely to release favourable information for the crypto market. However, the personnel reshuffle currently taking place at the central bank may also have a significant impact on the crypto market.
As is customary, a rate cut by the Fed often means a rebound in the crypto market — as yields on assets like bonds decline, the appeal of high-risk assets such as Bitcoin becomes stronger. Currently, market expectations for a rate cut are quite strong, and this news is generally favorable for the crypto market. However, this time the expectations for a rate cut coincide with political turmoil and personnel changes at the Fed. The Trump administration has accused Fed Governor Lisa Cook of mortgage fraud and is seeking to remove her; at the same time, the Senate has confirmed White House economic adviser Stephen Moore to join the Fed board. The accusations against Cook, the nomination, and individuals connected to the government could undermine the independence of the Fed, which plays a crucial role in formulating cryptocurrency policy.

What is the impact of a politicized Fed?
The Trump administration wants to dismiss Cook, who was appointed during Biden's term, essentially to strengthen control over the Fed. On August 25, the White House's X account posted a letter from Trump firing Cook, claiming she made false statements in mortgage agreements. However, Cook denied the accusations and refused to resign, with her legal team stating that the allegations were "politically motivated," and Cook also remarked that such an action was "unprecedented and illegal." Fortunately, on Monday, the Washington appellate court halted the dismissal action, allowing her to remain in position during the case review. The newly approved Milan has previously expressed support for encryption, but his term is temporary (ending in January 2026), and he has also refused to commit to resigning from his White House advisory role if his term extends. This has raised concerns among Democratic lawmakers that the Fed and its monetary policy will be more influenced by Trump's political objectives. It is important to note that the Fed has significant influence over banks, and banks, by deciding who can access financial services, have become the "quasi-regulators" of the crypto industry.
If the independence of the Fed weakens, its influence may not necessarily decline, but its policies may become erratic and more easily swayed by public sentiment. However, this is just speculation, as the politicization of the Fed is still an unknown territory. But at least during this administration's term, Trump tends to favor interest rate cuts.

The crypto market is on high alert, and low interest rates are the core favourable information.
On this side, Washington is fighting for the Fed, while on the other side, the crypto market is preparing for the meeting.
The market is closely watching: once interest rates are cut, the $7.2 trillion in money market funds and the trillions of dollars in outstanding mortgage debt may release liquidity, which could flow into alternative yield investments like DeFi and RWA. These types of investments are similar to growth tech stocks and are more sensitive to liquidity and risk appetite than Bitcoin. For example, investors might put more money into ETH, which has a "digital oil" narrative, or into SOL, which is experiencing rapid adoption growth. DeFi tokens become "more attractive" when interest rates decline, and related tokens will benefit. Although Bitcoin is considered a "quality crypto asset" and is not as sensitive to interest rate changes, unexpected policies or liquidity shifts can still affect it.
Historical data shows that when the Fed lowers interest rates to within 2% of historical highs, the S&P 500 index usually experiences a significant increase. In the past 20 rate cuts, although short-term fluctuations varied, all had risen one year later, and this time is likely to be the same—short-term volatility may be large, but long-term holders will benefit. Gold and Bitcoin have already "reacted," with prices rising sharply, clearly anticipating that rate cuts will drive up asset prices. It is indeed a good time to hold long-term assets.
Ultimately, the political struggle of the Fed is not over yet, but regardless of who is in power, low interest rates are always a good thing for traders.