Fed must remain dovish as the US government shutdown continues and the chances of rate cuts increase

It is more likely that the US Federal Reserve will cut interest rates the longer the government shutdown continues, which will ultimately be good for the crypto markets.

The blackout of US government economic data continues, with the shutdown entering day 23. There have been no September jobs reports for weeks, no major inflation numbers or initial unemployment claims.

Moreover, the Fed has done that lost access to key private employment data from ADP, covering 20% ​​of private workers, reported the WSJ and Kobeissi letter.

“The Fed must move even more accommodatively as the government shutdown continues, and they must cut rates,” the Fed said before adding:

“In fact, the chances of a 50 basis point rate cut increase by the end of the year.”

Impact on cryptocurrency

The Fed will continue to aggressively cut rates in the wake of the data blackout and stagflation for one simple reason: “they’re afraid of being ‘too late’.”

CME futures markets right now to predict a 96.7% probability of a 25 basis point rate cut at the October 29 FOMC meeting. The probability of a further 0.25% cut in December has also risen to 96.5% and the probability of a third cut in January is almost 60%.

When the Fed cuts rates, traditional safe investments such as savings accounts, government bonds and money market funds offer lower returns. This makes riskier assets like crypto more attractive by comparison, as investors looking for higher returns are more likely to allocate capital to crypto when they are earning minimal interest elsewhere.

Cutting interest rates also makes borrowing cheaper, putting more money into circulation throughout the financial system, increasing liquidity.

“Many traders look back on the positive performance in the fourth quarter and anticipate a repeat, so they buy and the price goes up,” said analyst ‘cryptobirb’ before adding:

“All in all the recent ones [leverage flush] The crisis should not cancel the end-of-year run.”

“The government shutdown has stopped the TGA (Treasury General Account) and the No RRP (Reverse Repo Facility) from running dry. [which means] less liquidity (temporary) [leading to] sloppy crypto as the pointy end of the liquidity spear,” said economist Raoul Pal, who added: “This too shall pass.”

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The government shutdown has stopped the drain of the TGA + No RRP to drain > Less liquidity (temporarily) > sloppy crypto as the pointy end of the liquidity spear. This too shall pass…

If you don’t understand, it’s best to ask @grok or the Raoulbot @RealVisie for my views https://t.co/AXsQMVgz7l

— Raoul Pal (@RaoulGMI) October 23, 2025

The Senate has failed to pass the House-passed funding bill to end the government shutdown for the twelfth time, meaning the stalemate will continue.

Markets are starting to consolidate

The crypto markets haven’t changed much in the past 24 hours, with a total capitalization of $3.75 trillion. Bitcoin has been trading within a tight range around the key support level at $108,000 and has struggled to break above it.

Ether prices remain suppressed, failing to regain $4,000 after a three-fold dip to $3,700, and altcoins continue to slowly bleed dry.