The Federal Reserve officially initiated a rate-cutting cycle in September 2025, marking a pivotal turning point in macroeconomic policy that is creating an unprecedented favorable environment for crypto assets. Despite short-term market volatility, the cheap liquidity brought by rate cuts, along with institutional allocation demand and global desire for alternatives to traditional finance, is forming a new cornerstone for the crypto market.
The U.S. core PCE in August remained at 2.7%, significantly higher than the policy target. However, due to the cooling labor market, the Federal Reserve has initiated precautionary rate cuts in September: On September 17, 2025, the Federal Reserve made the long-anticipated decision to cut interest rates by 25 basis points, lowering the federal funds rate target range from 4.25%-4.50% to 4.00%-4.25%, thereby officially launching the 2025 rate-cutting cycle. This follows three rate cuts implemented in 2024, as the Fed again adopts an accommodative monetary policy.
In the latest statement from the Federal Open Market Committee meeting, the Fed removed the key phrase “labor market conditions remain robust,” instead emphasizing that “employment growth has slowed and the unemployment rate has risen.” This shift indicates that, between its dual mandates of inflation control and employment support, the Fed has formally shifted its policy focus toward protecting the labor market.
Powell admitted during the press conference that “there is no risk-free path forward,” highlighting the cautious approach behind this round of precautionary rate cuts. The updated dot plot shows that Fed officials predict the median year-end interest rate for 2025 will be 3.6%, suggesting there is room for two more rate cuts this year. Markets reacted strongly, with CME Watch indicating that the probability of an October rate cut has risen to 91.9%, and the likelihood of completing a third rate cut in December exceeds 60%. Although there are slight differences between the dot plot guidance and market expectations, the accommodative tone has been largely established. The market had already priced in some expectation of three rate cuts this year, but after this meeting, that pricing has further increased.
Additionally, the final reading of the University of Michigan’s Consumer Sentiment Index for September came in at 55.1, down approximately 5% month-over-month from 58.2 in August, below market expectations of 55.4, and represents a significant year-over-year decline of 21.4%, reaching its lowest level since May 2025. Recent data indicate signs of cooling in the labor market (one of the reasons the Fed decided to cut rates in September), and markets are paying close attention to the upcoming September nonfarm payroll report; any signs of weakness could reinforce expectations for further Fed rate cuts.
Overall, the current macroeconomic landscape in the U.S. presents a picture of robust economic growth coupled with weak consumer confidence and considerable uncertainty regarding policy prospects. The Federal Reserve will continue to carefully balance the dual objectives of supporting employment and managing inflation within a data-dependent framework, making each interest rate decision akin to walking a tightrope.
Historical data shows that the US stock market tends to perform weakly in September, leading to the so-called “September curse.” However, driven by interest rate cut news, the Nasdaq, S&P 500, and Dow Jones indices all rose in tandem this September, each hitting record highs. Technology stocks performed particularly strongly, with Intel (NASDAQ: INTC) experiencing a single-day increase of over 22%. AI-related sectors continued their leading performance from the beginning of the year.
This round of increases has been supported by dual drivers: On one hand, the opening of the interest rate cut cycle significantly boosted risk appetite, consistent with the historical pattern where equity assets benefit first during a precautionary interest rate cut cycle. On the other hand, the AI industry has seen substantial earnings growth, with cases such as NVIDIA’s (NASDAQ: NVDA) multi-billion-dollar investment in OpenAI providing solid support for tech stock valuations.
Interestingly, the billion-dollar transactions between NVIDIA, OpenAI, and Oracle (NASDAQ: ORCL) seem to have created a new valuation framework for Silicon Valley: NVIDIA’s $100 billion investment will be gradually deployed alongside OpenAI’s 10-gigawatt computing power data center, with each gigawatt requiring 400,000 to 500,000 GPUs. The total of 10 gigawatts is equivalent to NVIDIA’s annual shipment volume — meaning the investment funds will eventually flow back to NVIDIA through OpenAI’s GPU procurement orders. Additionally, NVIDIA can also obtain profit-sharing from OpenAI via equity. Oracle’s involvement further strengthens the closed loop, as it first spends $400 billion on purchasing NVIDIA chips to build the “Stargate” data center for OpenAI, then provides computing power through a $3 trillion cloud service contract to OpenAI, forming a closed-loop cash flow chain of “OpenAI → Oracle → NVIDIA → OpenAI.”This model will drive a revaluation of technology stocks. By binding key downstream customers, NVIDIA has strengthened its pricing power and earnings visibility in the AI chip sector; Oracle has achieved a leapfrog advance in the cloud services market; and OpenAI has secured funding and computing power guarantees for continuous development. This powerful collaboration further intensifies the Matthew Effect in the AI industry, concentrating resources among leading enterprises, not only enhancing the certainty and synergy efficiency of each party’s business but also redefining the competitive paradigm of technology giants in the AI era, providing investors with a new framework for analyzing the value of tech stocks.
However, Federal Reserve Chair Powell has explicitly warned that the current valuation of the US stock market is “quite high,” a statement that is particularly crucial given the backdrop of record highs. Both the S&P 500 and Nasdaq have risen by more than 20% year-to-date, and the valuations of AI concept stocks have partially priced in future performance. Any hawkish signal could trigger profit-taking. Notably, Powell emphasized that this interest rate cut is “not the start of an aggressive easing cycle,” indicating that liquidity release will remain gradual.
Looking ahead, the US stock market still faces multiple tests. Inflation resilience remains the main constraint, with the core PCE up 2.7% year-on-year in August, still significantly above the policy target. If subsequent data rebounds, it may force the Federal Reserve to slow the pace of interest rate cuts. Meanwhile, there are divisions within the Fed regarding the policy path, and the risk of government shutdowns could delay the release of key data. These uncertainties will exacerbate market volatility.
Despite a pullback in September, with Bitcoin briefly falling below $110,000, strong support emerged in the $90,000 to $105,000 range, once again confirming the institutional behavior pattern of “buying on expectations and holding through volatility.” For instance, on September 25-26, due to macro risk aversion stemming from concerns that the U.S. federal government might shut down over budget issues, combined with profit-taking by long-term Bitcoin holders and high-leverage liquidations triggered by market declines, capital flowed out of risk assets like Bitcoin. However, institutional investors viewed this as a buying opportunity. On September 25, amid the price drop, U.S. spot Bitcoin ETFs recorded a net inflow of $241 million. Of this, BlackRock’s IBIT fund alone saw an inflow of nearly $129 million, bringing its total holdings to 768,000 BTC (approximately $85.2 billion).
Historical data also shows that after the Federal Reserve initiated “preventive rate cuts” in 2019, Bitcoin experienced nearly six months of volatility initially. As the long-term effects of the low-interest-rate environment gradually took hold, Bitcoin stabilized at $7,000 by the end of 2019 and continued its upward trend into 2020, breaking above $29,000 by the end of that year. Compared to the initial peak of $10,000 in July 2019 when rate cuts began, this represented an increase of over 200%; if measured from the December 2019 low of $7,000, the gain exceeded 300%.
The start of a rate-cutting cycle signifies a decline in interest rates in traditional financial markets. In an environment of low financing costs, companies are naturally more inclined to allocate funds to assets with high growth potential, and institutional investors’ actions become increasingly clear. However, unlike the rate cuts in 2019, the current cycle introduces a significant new variable: corporate treasury allocations in cryptocurrencies.
Moreover, these corporate allocations to crypto-assets are moving away from early marginal experimentation and tentative holdings toward long-term, strategic positioning. In September, the board of JZXN New Energy (JZXN Holdings) (NASDAQ: JZXN), a Nasdaq-listed company, approved a cryptocurrency investment plan worth up to $1 billion. Its management emphasized that they are “not pursuing short-term trading gains,” but instead view crypto-assets as a “long-term store of value to hedge against macroeconomic uncertainty,” highlighting the long-term and strategic nature of their allocation approach. From a regulatory perspective, also in September, the U.S. SEC and FINRA announced investigations into over 200 publicly listed companies announcing cryptocurrency treasury plans, focusing on abnormal stock price movements prior to announcements. While this poses short-term challenges, in the long run, weeding out companies attempting to manipulate their market capitalization using “crypto narratives” is a process of separating the genuine from the fake, thereby establishing a healthier environment for truly strategic treasury allocation models. For market participants, treasury dynamics will serve as another reliable window for observing industry trends.
In short, the evolution of cryptocurrency treasury allocations reflects the broader trajectory of the crypto market transitioning from the fringe to the mainstream, from speculation to utility, and from individuals to institutions. With the ongoing rate-cutting cycle, the dual drivers of a low-interest-rate environment and technological innovation are expected to further deepen and diversify corporate treasury allocations to cryptocurrencies. Companies incorporating crypto-assets onto their balance sheets are expressing confidence in the future of these assets in the most tangible way possible—with real money. This confidence, supported by ample liquidity provided by rate cuts, is likely to become a key driver of the next phase of growth.
Looking ahead, at least three factors are creating a favorable environment for crypto-assets, making them an increasingly attractive option:
Macro “fuel”—there will be 2-3 more rate cuts within the coming year.
Strengthening of political cycles – Trump administration’s pro-crypto policies and challenges to the Federal Reserve’s independence have highlighted the safe-haven characteristics of decentralized assets.
Global economy exhibits ‘real-virtual interconnection’ – the rise in gold prices signals recession concerns, while crypto-assets combine the store-of-value properties of gold with the growth potential of technology, making them a superior allocation choice during a rate-cutting cycle.