Federal Reserve cuts interest rates to 3.75%-4.0% and pauses balance sheet reduction

The Federal Reserve concluded its October 2025 meeting by delivering a 25 basis point rate cut, lowering the federal funds rate to a range of 3.75%-4.00%. This marked the second consecutive reduction in the policy rate as the central bank sought to balance persistent inflation concerns with emerging labor market weaknesses. The FOMC observed that economic growth remained moderate while job gains had slowed and unemployment edged higher, justifying the easing action.

In a significant policy shift, the Fed announced it would end quantitative tightening effective December 1, 2025, pausing the drawdown of its $6.6 trillion balance sheet. This decision reflected growing concerns about tightening money market liquidity conditions and declining bank reserve levels. The central bank would transition from reducing its balance sheet to rolling over maturing Treasury securities and reinvesting principal payments from agency debt and mortgage-backed securities.

However, Fed Chair Jerome Powell struck a notably cautious tone during his press conference, emphasizing that further rate reductions were far from certain. Powell stated that a December rate cut represented no foregone conclusion, signaling the committee had raised its bar for additional easing. While futures markets priced in approximately 70% probability of another 25 basis point cut in December, Powell's commentary suggested the Fed would require material evidence of labor market deterioration before proceeding with further cuts, particularly given inflation remaining "somewhat elevated" above the 2% target.

Crypto market experiences volatility with trading volume peaking at $428.2 billion on October 11

On October 11, 2025, the cryptocurrency market experienced a significant black swan event that reshaped market dynamics in unprecedented ways. Trading volume surged to $428.2 billion, representing a 106% month-over-month increase, demonstrating the extreme panic that gripped the market during this period.

The price movements across major cryptocurrencies were particularly severe. Bitcoin plummeted from all-time highs above $125,000 to below $110,000, with some exchanges recording lows around $102,000. Solana experienced even more dramatic losses, collapsing from approximately $220 to $169, erasing two weeks of accumulated gains.

The liquidation cascade proved catastrophic for leveraged traders. Nearly $17 billion in long positions were liquidated within 24 hours, affecting approximately 1.6 million traders. Network congestion reached critical levels, with average gas fees reaching 450 Gwei, and individual users reporting transaction fees between $400 and $500 to ensure timely settlement.

The global cryptocurrency market capitalization declined by 9.29% in a single day, with approximately $370 billion in value erased within hours. This event highlighted systemic vulnerabilities in the crypto markets and the risks associated with concentrated leverage positions during periods of elevated volatility.

Bitcoin and Ethereum spot ETFs see net inflows of $5.55 billion and $1.01 billion respectively in October

October 2025 ETF Inflow Analysis

October 2025 marked a significant turning point for cryptocurrency investment products, with Bitcoin and Ethereum spot exchange-traded funds demonstrating robust institutional appetite. The period witnessed Bitcoin spot ETFs accumulating $5.55 billion in net inflows, while Ethereum-focused products garnered $1.01 billion during the same timeframe.

This performance reflected the so-called "Uptober" momentum that propelled digital assets higher. Most notably, October 6 witnessed the single largest daily inflow of the year when Bitcoin ETFs recorded $1.21 billion in net inflows alone. The week ending in late October demonstrated that digital asset investment products collectively posted $5.95 billion in weekly inflows, with Bitcoin funds contributing $3.55 billion to that aggregate figure.

The concentration of capital into Bitcoin products relative to Ethereum reflects broader market dynamics regarding institutional risk appetite and hedging preferences. Market participants demonstrated stronger conviction in Bitcoin's macroeconomic positioning compared to Ethereum, translating into substantially larger capital allocation disparities. These October inflows represented meaningful validation of spot ETFs as preferred vehicles for institutional cryptocurrency exposure, establishing momentum that would influence subsequent quarterly performance metrics.

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