Optimism exploded in crypto markets on Monday, with Bitcoin soaring above $116,000 and Ethereum above $4,240, both two-week highs, according to Santiment data yesterday. The rally was clearly driven by traders betting heavily on further rate cuts ahead of the Federal Reserve's crucial two-day policy meeting on Oct. 28-29.
📈 On a bullish Monday, Bitcoin briefly exceeded $116,000 and Ethereum exceeded $424,000, both hitting two-week highs. There is positive momentum in the crypto market as the FOMC meeting begins tomorrow and President Trump's Cryptocurrency Advisory Council has traders optimistic. pic.twitter.com/icQuE1NbhD
— Santiment (@santimentfeed) October 27, 2025
However, Tuesday brought some cooling, with Bitcoin falling back toward $114,000 and Ethereum falling below $4,100. The pause signals the market is digesting Monday's gains and adopting a more cautious stance as the Fed's actual decision approaches.
Monday's bull market: Pricing a widely expected Fed rate cut
Yesterday's rally was a textbook front for the dovish Fed. There is near consensus in the market that the FOMC will announce a 25 basis point rate cut on Wednesday afternoon (2:00 p.m. ET). This belief stems from recent U.S. economic data, particularly the softening of the labor market and generally lower-than-expected inflation rates.
Lower interest rates typically make borrowing cheaper and holding cash less attractive, which has historically encouraged capital flows into higher-risk assets such as cryptocurrencies. Monday's rise reflects the market pricing in this expected increase in liquidity.
The prices of Bitcoin and Ethereum will stabilize as the cryptocurrency market takes a breather in anticipation of the upcoming Federal Reserve decision.
Rotation Signal: AI, DeFi Tokens Lead Monday Charge (Santiment)
Further evidence of risk-on sentiment on Monday came from the sector's performance. Santiment’s data highlighted that tokens related to artificial intelligence (AI) and decentralized finance (DeFi), such as Fetch.ai (FET), Ocean Protocol (OCEAN), and Render (RNDR), were among the best performers. This rotation into the high-beta segment signals increased market confidence, which is often seen when traders anticipate easing in financial conditions.
Bitcoin led the social media conversation yesterday, but the outperformance of these riskier altcoins shows that capital is actively moving up the risk curve in anticipation of the Fed's decision.
Markets pause on Tuesday: focus shifts entirely to Powell's guidance
Today's slight pullback shows the limits of trading on rumors. The 25bps rate cut is widely expected and likely priced into Monday's price, but the immediate impact after the announcement could be muted.
Currently, the actual trigger for volatility is Fed Chairman Jerome Powell's press conference remarks after the decision. Think of interest rate cuts as a prelude. Mr. Powell's commentary was the main event. Monday's rally could be reignited if he signals a clear path to further easing or downplays persistent inflation concerns.
But any hawkishness that emphasizes reliance on data, persistent inflation risks and uncertainty about future rate cuts could quickly unwind recent gains. The market is currently in a holding pattern, fully awaiting Chairman Powell's tone to determine the next direction.
Related: Bitcoin and Ethereum ride polymarket Fed rate cut sentiment. Will the next one be overbought?
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