Dovish Fed Spurs Crypto Gains, Dollar Strength Remains a Headwind

Major cryptocurrencies, led by Bitcoin, are gradually moving higher following Wednesday’s Federal Reserve rate cut, though a resilient U.S. dollar could temper further gains.

The Fed lowered its benchmark rate by 25 basis points to 4% and suggested the possibility of faster easing over the next year, giving risk assets a boost.

Bitcoin and Ethereum Lead the Recovery
Bitcoin (BTC) climbed above $117,900, the highest since mid-August, ending a sideways trend and continuing its recovery from early September lows near $107,200. BTC was up nearly 1% over 24 hours at the time of writing.

Ethereum (ETH) rose 2.7%, remaining within a four-week contracting triangle. Other major tokens, including Dogecoin (DOGE), Solana (SOL), and BNB, gained more than 4%, while XRP moved nearly 3% higher after a bullish descending triangle breakout.

Institutional Developments Boost Solana and XRP
Solana briefly traded at $245, approaching its weekend high, following CME Group’s announcement that SOL and XRP options will debut on October 13. These derivatives are expected to enhance institutional participation and allow more precise exposure management.

Matt Mena, crypto research strategist at 21Shares, noted that the Fed’s dovish stance has created an “asymmetric setup” for Bitcoin. “While the 25bps cut provided an initial spark, the path implied by the Fed’s dot plot could drive BTC toward new highs by year-end. Bitcoin may surpass $124,000, and Ethereum could top $5,000,” he said.

Dollar Resilience Could Limit Upside
Despite dovish projections, the Dollar Index (DXY) rebounded to 97.30, recovering from its July 1 low of 96.37. Powell’s caution against rapid successive cuts, along with ongoing balance sheet runoff and high inflation, supports the dollar’s strength. A stronger DXY could tighten financial conditions, potentially constraining BTC and other risk assets.

Tail Risk Pricing on the Rise
Crypto financial platform BloFin reported rising demand for tail risk protection—hedges against rare but severe market events. Short-dated BTC put spreads have surged, reflecting growing concern over downside scenarios in volatile markets.