Trump’s long-term economic strategy is relatively complex and heavily reliant on the Federal Reserve (FED). At its core, his approach aims to reduce inflation and wind down foreign conflicts — both of which could pressure the FED into cutting interest rates. As inflation cools, the FED may be forced to lower rates to avoid deflation, since their target is typically around 2% to support steady economic growth. If the FED doesn’t act, there’s a risk of economic contraction — something we’re already beginning to see, with a rise in unemployment figures.
If the Trump administration succeeds in pressuring the FED to cut rates, here are the key outcomes we could expect:
If rate cuts alone aren’t enough to stimulate the economy, there’s also the possibility of Quantitative Easing (QE):
A useful way to track market sentiment is by looking at the Bitcoin dominance chart and the combined USDT + USDC dominance chart as illustrated in Figure 1. These show what percentage of capital in the crypto market is currently sitting in Bitcoin and stablecoins — essentially, how risk-averse the market is.
If interest rates are cut, we’re likely to see a significant flow of money into riskier assets within the crypto space — particularly altcoins. This shift would reduce both Bitcoin and stablecoin dominance, as capital moves away from these safer assets and into altcoins. Such a trend could provide a major opportunity for alt coins to rally in a more liquid environment where investors hunt for higher returns.
However, it’s important not to misinterpret this movement. While money will still flow into Bitcoin and stablecoins — especially as entry points — there is a strong chance that much of it will eventually rotate into higher-risk alt coins like Cardano, Solana, and others as investors seek greater returns.
In the short term, analysts expect the Federal Reserve to hold interest rates steady at 4.25% – 4.50% during the March meeting. This suggests that any immediate impact on the crypto market is unlikely to come from rate cuts.
Looking further ahead, however, economists are predicting potential rate reductions around June or September 2025, under the pretence of weaker economic growth driven by indicators such as slowing GDP or rising unemployment. This view is echoed by market data from the CMEFedWatch Tool (Figure 2), which shows rising probabilities for cuts to begin mid-to-late 2025.
The impact of Trump’s administration on the crypto market is already being felt — and it’s likely just the beginning. His broader strategy appears to centre around weakening the dollar, reducing inflation, and slowing economic growth. With quantitative tightening already easing and unemployment on the rise, pressure is mounting on the FED to respond with rate cuts.
If the FED follows through, the knock-on effects could be significant: increased liquidity, higher risk appetite, and capital rotation into crypto. While recent market action post-election has sparked fear, it’s important to recognise that these are short-term reactions to a long-term strategy.
Should rate cuts alone fall short, Quantitative Easing (QE) may provide the additional fuel needed.As shown in Figure 3, Bitcoin’s price has historically tracked global liquidity trends — with expansions in the money supply (M2) often coinciding with major crypto rallies. QE, therefore, could play a pivotal role in triggering the next leg up for Bitcoin and broader crypto markets.
Ultimately, while nothing is guaranteed in the world of crypto, the combination of FED policy shifts,Trump’s macroeconomic pressure, and available stablecoin capital could set the stage for a future rally. Patience and a long-term perspective may be key for those watching the charts — and waiting for the next move.
