For the first time in 2025, the United States Federal Reserve is preparing to cut interest rates while the S&P 500 is trading at all-time highs, and according to The Kobeissi Letter, the time has come for an important shift in markets that could usher in the next crypto market bull run.
As it stands, record stock valuations, resilient GDP growth, sticky inflation, and cracks are forming in the labor market, leaving the stage open for volatility in traditional markets that could spill over into the next explosive altcoin season.
Expectations are also high that the Fed will keep lowering rates at the next interest rate decision on Wednesday, September 17, 2025 and through the end of this year. According to a lengthy thread that was posted on the social media platform X, this could have long-term bullish effects on the crypto industry.
The Federal Reserve usually cuts rates in the face of economic weakness and depressed equity markets, but this time is different. As noted by The Kobeissi Letter, valuation metrics tracked by Bloomberg show US stocks are more expensive than ever, having surpassed even the 1929 pre-Depression peak and the dot-com bubble. Furthermore, the S&P 500’s price-to-book ratio hit 5.3x in late August, its record level.
Despite these extremes, policymakers are expected to cut by at least 25 basis points this week based on weakness in the labor market. History shows that when rate cuts occurred with stocks within 2% of all-time highs, as shown in 2019 and 2024, the S&P 500 delivered strong gains over the following year. This unusual mix could once again amplify capital flows into high-growth assets, including cryptocurrencies, in the last quarter of 2025.
Cutting rates into hot inflation adds liquidity fuel just as investors chase risk assets. That backdrop has always caused powerful surges for Gold, Bitcoin, and other major cryptocurrencies, as the return of these assets thrives when fiat returns come under question.
As The Kobeissi Letter framed it, the time has come. The Fed’s decision to cut rates with stocks at record highs, amid a 3% GDP growth and hot inflation 110 bps above the Fed’s long-term target, could be the driver of the next altcoin season. Gold and Bitcoin have already been priced in this new era of liquidity, as both are now up by 450% and 105%, respectively, since 2023.
The setup is even better for altcoins like Ethereum, XRP, Chainlink, and most especially cryptocurrencies involved in the growing AI niche. There could be more immediate-term volatility, but long-term asset owners will benefit the most from the rate cut.
However, if the Federal Reserve opts for a slower pace of cuts than markets are currently pricing in, the disappointment could ripple through both equities and cryptocurrencies and cause short-term declines this week.
