The performance of Bitcoin and Ethereum in the final months of the year is expected to be heavily influenced by potential interest rate adjustments by the Federal Reserve and the demand generated by Exchange Traded Funds (ETFs). Recent labor market data revealed the smallest increase in jobs since 2020, suggesting the Fed may consider policy adjustments as early as September. The short-term direction of the crypto market hinges on how these rate expectations affect the flow of funds into spot ETFs, borrowing costs, and options strategies.
Data released by the Bureau of Labor Statistics indicated that nonfarm payrolls saw a modest gain of just 22,000 in August, with the unemployment rate climbing to 4.3 percent.
Financial futures markets are currently indicating a strong likelihood of a rate cut in September. CME’s FedWatch tool, which analyzes rate probabilities derived from fed funds futures, reflects this sentiment. The broader financial landscape is also aligning, as evidenced by the dollar’s proximity to recent lows and gold prices reaching new peaks.
According to reporting by Reuters, the dollar index experienced a dip to its lowest level in seven weeks, while spot gold achieved a new record high this week. Traders are seemingly pricing in a near-certain rate reduction in September, with a slight possibility of a more aggressive move.
The Federal Reserve’s schedule outlines the upcoming policy meetings, including a two-day session on September 16-17, followed by meetings in October and December to conclude the year. Some financial institutions are now forecasting two quarter-point rate cuts in 2025, potentially in September and December, a projection that gained traction following the release of the August jobs report.
Historical Insights
Examining ETF flows during previous periods of monetary easing provides a framework for understanding the potential impact of future rate cuts. During the week of a rate cut in September 2024, U.S. spot Bitcoin ETFs collectively attracted approximately $2.4 billion, while Ethereum ETFs added around $600 million between Monday and Friday.
In the week corresponding to a December 2024 rate cut, Bitcoin ETFs saw inflows of about $1.6 billion, while Ethereum funds remained relatively stable. Data from Farside Investors’ Bitcoin and Ethereum ETF tracking tables reveals a similar pattern: positive net flows tended to cluster around the decision announcement, with quieter periods on either side.
Recent data from the past two months highlights the ongoing sensitivity of these markets to macroeconomic developments. Bitcoin ETFs experienced three days with inflows exceeding $800 million in mid to late August, even with outflows on surrounding days, pushing the cumulative net intake for U.S. spot ETFs to roughly $50 billion plus.
Ethereum ETFs saw a surge in late summer, recording their largest single-day inflow of approximately $1.02 billion on August 11, bringing the cumulative net flow to a little over $10 billion.
These trends indicate that flow momentum can shift rapidly based on macro news and that clustered inflows tend to drive price increases. In the Bitcoin context of 2024-2025, a rough estimate suggests a 2–3 percent price movement per $1 billion of net purchases during periods of concentrated inflows – a guideline rather than a rigid rule.
Implications of Rate Cuts for Bitcoin in Q4
Considering this historical context, the fourth quarter’s trajectory can be viewed through three potential scenarios. If the Fed implements a total easing of 75 basis points by December, distributed as 25 bps cuts at each meeting, baseline weekly net inflows for Bitcoin ETFs in decision weeks could range from $1.2 billion to $2.0 billion, and for Ethereum, $300 million to $700 million, assuming the established correlation between cut probabilities and allocations remains consistent.
Applying a simplified sensitivity analysis, each additional $1 billion of net Bitcoin ETF demand concentrated over a five-day trading period could contribute 2–3 percent to spot returns that week, with the most significant impact occurring in the sessions following the decision if forward guidance indicates further cuts.
A more aggressive 100 bps easing path, achieved through a 50 bps cut in September followed by two more 25 bps cuts, or a 25 bps cut in September with a quicker follow-up, would likely lead to a faster compression of real yields, resulting in more pronounced “risk-on” reactions across assets like gold and duration. In such a scenario, the upper end of the flow range becomes more relevant, potentially leading to multi-day runs of $700 million to $1 billion for BTC instead of isolated spikes.
An unlikely but possible 125 bps easing path, triggered by worsening labor data and significant revisions, would likely coincide with a substantially weaker dollar and easier overall financial conditions. In this case, sensitivities should account for sustained multi-week inflow patterns rather than just single-week surges.
Avoid Investment Pitfalls
Enroll in the Crypto Investor Blueprint, a 5-day course packed with expert strategies to optimize your crypto holdings.
Brought to you by CryptoSlate
Under such a high-easing scenario, modeled ETF demand would scale to the upper range, potentially resulting in an additional $1.5 billion to $6.0 billion of Bitcoin ETF inflows through Q4. This translates to roughly a 3-18 percent price impulse linked to flows, depending on how concentrated demand becomes during decision weeks.
Ethereum’s Relationship with Fed Rates
Options trading is a key factor for Ethereum, as listed options on spot Ethereum ETFs allow market makers to implement hedging strategies. The SEC’s approval order from April 9 for NYSE American authorized options on the Bitwise Ethereum ETF, the Grayscale Ethereum Trust, and the Grayscale Ethereum Mini Trust. Similar filings were subsequently made by Cboe in April.
In scenarios with high options trading volume, dealer gamma can reduce intraday price volatility near major strike prices in the weeks leading up to expiration. However, directional moves can be amplified if positioning is unfavorable. Therefore, the Ethereum scenarios outlined above should be analyzed alongside an options-adjusted sensitivity analysis.
A practical approach is to consider a range of plus or minus 1-2 percentage points around the base elasticity during weeks with significant options activity and a reduced impact during low-volume periods.
Broader macroeconomic forces can either expand or contract these ranges. A record-breaking $100 billion weekly sale of four-week Treasury bills signals a shift toward very short-term Treasury financing. This could lower the front end of the yield curve when cuts are implemented, supporting risk assets, although rollover risk may increase if funding conditions become more restrictive.
The timing of the Fed meetings is also crucial, with the September meeting providing forward guidance that will shape expectations for the end of the year. Market-implied projections for year-end policy, as tracked by the Atlanta Fed’s Market Probability Tracker, still assign significant weight to multiple rate cuts in 2025-2026. If these cuts materialize, they would contribute to a lower-volatility environment conducive to consistent inflows.
Conversely, if inflation data accelerates or revisions indicate less slack in the labor market, the flow ranges could compress toward the lower end, and elasticity could decrease as duration and the dollar stabilize.
Projected Bitcoin and Ethereum Performance Following Rate Cuts
Translating these flow ranges and rate paths into specific price targets requires quantitative analysis.
For Bitcoin, if September and December decision weeks each generate $1.5 billion to $2.5 billion of net ETF purchases under a 75-100 bps total easing scenario, a 4-7 percent cumulative price impulse driven solely by flows is conceivable across those weeks. Actual outcomes would be further influenced by funding conditions, basis trading, and the dollar’s trajectory.
In a more aggressive 100-125 bps path with higher inflows, for example, $2.5 billion to $4.0 billion concentrated, the flow-linked contribution could reach the high single digits. The same logic applies to Ethereum but at smaller dollar scales, with options hedging potentially smoothing or amplifying these moves near expiration dates.
| Path (total bps by Dec) | Decision weeks modeled | BTC ETF net flows (Q4, $B) | ETH ETF net flows (Q4, $B) | BTC flow-to-return effect (%) | ETH flow-to-return effect (%) |
|---|---|---|---|---|---|
| 75 | 2 | 0.8 to 3.2 | 0.2 to 0.8 | 1.6 to 9.6 | 0.6 to 4.0 |
| 100 | 3 | 1.2 to 4.8 | 0.3 to 1.2 | 2.4 to 14.4 | 0.9 to 6.0 |
| 125 | 3 (upper bands) | 1.5 to 6.0 | 0.4 to 1.6 | 3.0 to 18.0 | 1.2 to 8.0 |
This framework is inherently data-dependent and requires real-time updates. However, the core structure remains stable: track FedWatch probabilities alongside Bitcoin and Ethereum ETF flows, and use the FOMC calendar to identify key decision weeks.
To gain broader context on risk appetite, monitor trends in the dollar and gold and utilize the Market Probability Tracker to validate the implied path of monetary policy.