U.S. equities and crypto markets are showing renewed strength as softer-than-expected CPI data fuels optimism for a more accommodative Fed stance. The market is now pricing in three rate cuts in 2025, totaling 75 basis points, which would bring the Fed Funds target rate to 3.50%–3.75% by year-end. This shift in expectations has accelerated momentum in risk assets, with valuations likely to remain supported in the near term.
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Importantly, significant institutional capital — including allocations from the $7 trillion U.S. money market funds — may still be on the sidelines, awaiting formal confirmation from the Fed before rotating into higher-risk assets like cryptocurrencies. Once policy guidance aligns with these market expectations, we could see substantial new liquidity entering the crypto market.
However, investors should remain vigilant. Geopolitical risk remains a critical variable, with a highly anticipated Trump–Putin meeting scheduled for tomorrow — the first top-level U.S.–Russia dialogue since the invasion of Ukraine. Official statements suggest discussions will cover both the war in Ukraine and potential economic cooperation. While a breakthrough could bolster risk sentiment, a breakdown in talks may trigger a near-term correction across risk assets.
Bottom line: The macro backdrop is turning more supportive for crypto, but geopolitical developments could inject short-term volatility.
