After months of back-and-forth between President Trump and the Federal Reserve, the central bank took action on September 17, 2025. The Fed announced its first interest rate cut in nine months, a move that sparked fresh debate across markets. But the pressing question for investors remains: “Could this decision pave the way for crypto’s next major rally?”

Well, let’s break it down.

What is The Federal Reserve?

The Federal Reserve, often called (The Fed) is the Central Bank of the United States. Its job is to maintain a stable and flexible monetary and financial system.

The Fed is a complex structure consisting of the Board of Governors, 12 Federal Reserve Banks, the Federal Open Market Committee, and the Consumer Financial Protection Bureau.

Their key functions include:

• Managing monetary policy
• Promoting financial stability
• Currency management
• Government's Bank
• Regulating financial institutions

What are Interest Rates?

Central banks use interest rates as a key policy tool to balance growth and inflation. In the U.S., the federal funds rate serves as the primary benchmark, guiding short-term borrowing costs across the economy. Lowering rates is intended to stimulate demand by making credit more affordable, while raising rates curbs inflation by tightening financial conditions. Thus, interest rates represent both the cost of borrowing and the return on savings, shaping investment, consumption, and monetary stability.

How Interest Rates Impact Investments (Crypto, Commodities, Stocks, and other Risky Assets)

Interest rates are one of the most important macroeconomic indicators, shaping how governments, businesses, and investors make decisions. As a leading signal, changes in interest rates can predict shifts in borrowing, spending, and investment behaviour.

Commodities

In 2022, the U.S. Federal Reserve fought soaring inflation with aggressive interest rate hikes, sending shockwaves through global markets. Oil, already near historic highs due to supply chain disruptions and the war in Ukraine, faced added pressure as financial conditions tightened. Agriculture was also hit. Higher borrowing costs made it harder for farmers to fund equipment and operations, pushing up the prices of key crops like corn, soybeans, and wheat.

Gold, long seen as a safe haven in uncertain times, moved in the opposite direction. As expectations of lower interest rates and rising market volatility grew, demand for gold surged in 2024 and carried into 2025, driving prices to record highs amid mounting U.S. debt and economic uncertainty.

The connection is clear: higher interest rates tend to strengthen a country’s currency, making dollar-priced commodities more expensive for foreign buyers and often pushing prices down. Lower rates, on the other hand, fuel borrowing and economic activity, weaken the currency, and increase global demand for raw materials, a dynamic that often lifts commodity prices.

Crypto Market

Bitcoin’s crash in 2022 didn’t happen in isolation; it was triggered in part by the Federal Reserve’s aggressive interest rate hikes, which jumped from near zero to over 4.5% within the year to fight inflation. At the time, Bitcoin was trading around $48,000 in March but kept sliding as rates climbed, eventually dropping below $16,000 by November, a loss of more than 65%. The downturn didn’t stop with Bitcoin. Ethereum and other major altcoins also tumbled, causing the entire crypto market to shrink from nearly $3 trillion at the end of 2021 to under $800 billion by late 2022.

On the reverse, when interest rates are low, money is cheaper to borrow, and investors usually take on more risk to find better returns. This extra liquidity often flows into assets like stocks, real estate, and crypto.

A clear example is 2020–2021: during the pandemic, central banks cut rates to 0.25% and injected money into the economy. With cheap credit and stimulus flooding markets, investors piled into Bitcoin, Ethereum, and altcoins. The result? Bitcoin climbed from under $10,000 in mid-2020 to almost $69,000 by late 2021, while the total crypto market cap exploded past $3 trillion.

Stocks

Stock markets usually react immediately to interest rate changes, while the broader economy can take months (sometimes a year or more) to fully adjust. When rates rise, borrowing costs for companies increase, squeezing their profits. At the same time, consumers tend to cut back on spending since loans, credit cards, and mortgages all get pricier. This one-two punch often drags stock prices lower, except for financial institutions like banks, which can benefit from higher lending margins.

There’s also the matter of valuation. Investors value stocks based on the present value of future cash flows. Higher interest rates raise the discount rate, which lowers those valuations, making stocks less attractive. On the other hand, when rates are cut, borrowing becomes cheaper, consumer demand strengthens, and company valuations rise, often sparking a market rally.

Another layer to this is investor psychology. Rising rates usually shift money away from stocks into “safer” assets like bonds, which suddenly offer more attractive returns. But when rates fall, bonds look less appealing, and investors are more likely to put their money back into stocks, fueling growth.

How to Stay Positioned & Profitable During Interest Rate Change

Staying profitable and well-positioned during changing interest rates comes down to adapting your strategy depending on whether rates are rising or falling. Here’s a clear breakdown for you:

When Rates are Rising

• Focus on defensive stocks: Utilities, consumer staples, and healthcare often perform better since people still need these products regardless of borrowing costs.
• Financial sector opportunities: Banks, insurance companies, and lenders can benefit from higher lending margins.
• Reduce high-debt companies: Firms that rely heavily on borrowing may see profits shrink, so avoid or minimize exposure.
• Hold some cash / short-term bonds: These become safer and offer better returns as yields rise.
• Commodities & gold: Often serve as hedges when markets get pressured.

When Rates are Falling

• Growth & tech stocks shine: Cheaper borrowing helps fuel expansion and innovation, boosting valuations.
• Real estate benefits: Lower mortgage rates can drive demand and increase property values.
• High-yield assets: Investors search for returns, so riskier assets like crypto and emerging markets often gain momentum.
• Long-term bonds: Their prices rise as interest rates fall, offering strong returns.

General Positioning Tips

1. Diversify: Don’t put all your money in one sector or asset class.
2. Think long-term: Short-term market moves are often overreactions.
3. Hedge smartly: Gold, commodities, or even cash reserves can protect your portfolio in volatile times.
4. Stay informed: Central bank announcements (like FOMC meetings) often set the tone for markets. Being early helps.
5. Dollar-cost averaging: Keeps you invested without trying to time the market perfectly.