The federal funds rate has been lowered to 4.00%-4.25%. The first 25 basis point rate cut of the year has just been implemented, and Bitcoin immediately surged past the $118,000 mark, while Ethereum also broke through $4,600. Watching this market movement, many are asking: can a rate cut truly drive the price of cryptocurrencies higher?

To be honest, the answer isn't that simple. As an analyst who has experienced multiple bull and bear cycles, I have seen many instances where the market reaction to rate cuts was completely opposite to expectations. The key isn't the rate cut itself, but the magnitude of the cut and the scale of liquidity released.

Let's look at history. In 2019, the Fed's preemptive rate cuts of 75 basis points didn't lead to much increase in Bitcoin's price; in fact, there was even a correction. But in 2020, when the pandemic hit, it was a different story—zero interest rates combined with unlimited quantitative easing flooded the market with money. Bitcoin soared from $3,800 to $69,000, an over 18-fold increase. Same rate cut, vastly different effects.

What is the fundamental reason? The larger the rate cut, the more liquidity is released into the market. In 2020, the Federal Reserve's balance sheet expanded from $4 trillion to $9 trillion. Such a scale of growth naturally pushes funds to seek high-yield outlets. Traditional financial returns were suppressed to the floor, making the crypto market a safe haven for capital.

How much additional capital will this 25 basis point cut bring? That is the real variable that will determine the subsequent market trend.