Federal Reserve Cuts Interest Rates, Impacting Bitcoin

Earlier this week, the Federal Reserve made a notable move by lowering interest rates by 25 basis points. This decision likely offers a much-needed boost to the economy, especially after a period where rates were raised to combat inflation. Lowering interest rates might also favor riskier assets like Bitcoin (BTC).

The possibility of decreased interest rates could lead to reductions in Bitcoin supply.

According to a recent analysis by the Arab chain of contributors, new data from Binance reveals that the cuts in interest rates have sparked renewed interest among investors in BTC. Specifically, the exchange supply ratio has fallen to 0.0291, indicating that investors are withdrawing Bitcoin from the exchange, opting to hold onto it for the long term rather than selling.

To support this analysis, the Arab chain shared a chart illustrating the changes in exchange supply while Bitcoin prices have been rising. Analysts noted that the drop in interest rates has likely increased investors’ willingness to take risks and has provided a boost in market liquidity.

This action suggests that the Fed’s monetary policy will likely remain favorable in the short term, potentially alleviating some of the selling pressure on Bitcoin for now. A lower supply on exchanges contributes to increased buying pressure, especially as Bitcoin maintains stability above $115,000.

Analysts believe that, if the trend of Bitcoin withdrawals from crypto exchanges continues, digital assets could be eyeing resistance around the $120,000 mark. However, it’s important that liquidity resulting from the Fed’s actions keeps flowing into these assets.

The ongoing decrease in the Bitcoin exchange supply rate, combined with rising prices, supports bullish scenarios—particularly as traditional markets find their footing after the Fed’s decision. On the flip side, if the supply rate begins to rise again (indicating more Bitcoin flowing back to exchanges), this could suggest that investors may be looking to take profits near the $118,000 to $120,000 range.

Meanwhile, a crypto analyst known as Titan shared similar views in a recent post. They pointed out that Bitcoin seems to be caught in a bearish fair value gap. Surpassing this gap—marked in red in their chart—could potentially lead to new highs for Bitcoin.

Is BTC Facing a Supply Crunch?

The decline in exchange supply rates indicates that Bitcoin might be nearing a bullish “supply crunch,” which could drive prices for digital assets higher in the near future.

Recently, the Bitcoin Scarcity Index recorded its first rise since June 2025, hinting at possible price pressures upward for BTC. Additionally, rapid outflows from Binance are further diminishing the active circulating supply of these digital assets.

However, some concerns persist, particularly the noticeable absence of whale activity in the recent Bitcoin price movements. Currently, Bitcoin is valued at $116,374, reflecting a 1.3% drop over the last 24 hours.