Hotcoin Research | September Rate Cut Confirmed: Is Altcoin Season Counting Down as Uptober Ignites Q4?

I. Introduction

On September 17 (local time), the Federal Reserve cut rates by 25 bps, lowering the federal funds target to 4.00%–4.25% — the first cut since December 2024. U.S. equities jumped before retreating, the dollar index dipped, and crypto rebounded after brief volatility: Bitcoin rallied past $117,000, Ethereum broke $4,600, and altcoins surged across the board.

Unlike past cuts driven by recessions or crises, this move is framed as a “risk-management” adjustment. The U.S. economy is not in contraction, unemployment remains low, and inflation, though not normalized, is easing. The Fed is aiming for a measured and sustained easing cycle rather than an aggressive free-fall.

With October’s historic “Uptober” momentum and Q4’s seasonal strength aligning with a looser macro backdrop, markets are widely anticipating a countdown to altcoin season.

This report:

• Reviews the Fed’s past rate cycles and 2024 cuts
• Analyzes the September 2025 decision in context
• Examines indicators such as the Altcoin Season Index, Bitcoin dominance, and institutional flows
• Looks ahead to how Uptober and easing expectations may shape Q4

II. Fed Rate Cycles and the 2024 Cuts in Review

Across past Fed cycles, shifts between easing and tightening have had profound impacts on global assets — including crypto. History shows that when financial conditions loosen, Bitcoin tends to rally, while sharp tightening often drives the market into deep bear phases.

• In 2016–2017, gradual hikes kept rates low, fueling a massive Bitcoin bull run.
• In 2018, sustained hikes and balance sheet reduction triggered an 80% Bitcoin crash.
• In 2020–2021, ultra-low rates and QE drove crypto exuberance.
• In 2022, aggressive tightening plunged the sector into winter.

The Fed’s rapid hikes to 5.5% through 2022–2023 ended in September 2024, when cuts began — bringing rates to today’s 4.25%. These policy inflection points consistently align with turning points in crypto trends.

The year 2024 marked crypto’s shift from bear to bull, underpinned by monetary policy. After 500+ bps of hikes across 2022–2023, the Fed halted increases and began signaling cuts in mid-2024. With inflation easing below 3% and job growth turning negative, the tightening cycle peaked. The Fed then cut three times in H2 2024–50 bps in September, 25 bps in November, and 25 bps in December. By year-end, the funds rate fell from 5.25%–5.50% to 4.25%–4.50%, formally ending the fastest tightening cycle in decades.

The impact on crypto was immediate.

• The September cut lit the fuse, amplified by the April halving supply shock.
• Bitcoin surged from ~$60,000 in mid-September to over $120,000 by July 2025.
• Liquidity shifts fueled capital inflows: the first U.S. spot Bitcoin ETF launched, Grayscale trust discounts narrowed, and tech giants rolled out on-chain strategies.

These factors laid the foundation for crypto’s recovery into 2025.

Historically, first cuts occur when growth slows and unemployment bottoms before rising. This “policy pivot” is usually read as a green light for risk assets. Crisis-driven cuts (2008, 2020) can spark initial panic selling, while mid-cycle or preventive cuts tend to directly boost confidence. Powell framed the latest move as the latter — a risk-management cut, not crisis response — suggesting a gradual, measured easing cycle ahead.

III. Understanding the September 2025 Rate Cut

The September 2025 cut was a “proactive defensive” move — a risk-management step to balance soft-landing goals with inflation control. It differs from past cuts in several ways:

• Macro backdrop. The U.S. is not in recession. The cut is preventive, not reactive. The FOMC cited slowing growth, cooling job gains, and a slight uptick in unemployment, with inflation “elevated but easing.” This signals the Fed is cushioning employment risks while still aiming for a soft landing — not responding to systemic shocks.
• Policy continuity. This is the first cut of 2025, resuming easing after a 9-month pause. The September dot plot points to two more 25 bps cuts this year and one annually thereafter, outlining a slow downward path. This reflects confidence in economic resilience while preserving policy space to avoid reigniting inflation.

• Forward guidance. Powell stressed that “this is not the start of consecutive cuts.” The Fed is cautious about fueling expectations of unlimited easing, which could overly loosen financial conditions. For crypto, the near-term impact is supportive — lower rates boost risk appetite. But longer term, absent major economic deterioration, rates may stabilize near neutral rather than drop back to zero. Easing lifts confidence, but uncertainty remains.
• Quantitative tightening. The Fed’s balance sheet has shrunk from nearly $9T in May 2022 to about $6.6T now. Liquidity gains will be gradual, with long-term rates constrained by supply.

For crypto investors, the cut is a clear liquidity-positive signal. But upcoming October and December FOMC meetings and economic data will be key to gauging the pace and strength of further easing.

IV. How Close Is Altcoin Season? Key Data and Signals

• Altcoin Season Index surging. One of the most important gauges of altcoin relative strength is the Altcoin Season Index, which tracks how many of the top 100 tokens have outperformed Bitcoin over the past 90 days. Above 75% signals “altcoin season.” As of September 18, the index stood at 71% — just 3 points away. Earlier this year, it hovered below 50%, meaning Bitcoin outperformed most of the market. The sharp rise suggests capital is rotating from Bitcoin into higher-risk altcoins. Historically, this happens after strong Bitcoin rallies followed by consolidation, creating space for altcoins to shine. With BTC around $110,000 and many altcoins still far below previous highs, capital is sensing opportunity.
• Bitcoin dominance slipping. Echoing this, Bitcoin’s share of the total crypto market cap has eased from Q2 highs above 50%. Since mid-Q3, dominance has dropped 3–5 percentage points, showing altcoins are growing faster than Bitcoin. The typical rotation pattern is: Bitcoin rallies → stalls → flows into major altcoins → then into mid- and small-caps. Today, the market appears in the middle phase. Unless Bitcoin sees a sharp correction, altcoins are positioned to take the lead. In the 2021 altcoin season, BTC dominance fell from over 60% to below 40%, with many tokens gaining 10x–100x.
• Institutions joining the altcoin trade. It’s not just retail — institutions are also allocating into quality altcoins. Corporate treasuries now hold over $100B in crypto, with Bitcoin at ~$93B and Ethereum reserves past $4B. Firms are adding SOL, BNB, SUI, and XRP, while large crypto funds position in leading altcoins ahead of potential rotation. These moves show that altcoin season is no longer just a retail narrative — institutions are preparing too.

What leads the next rotation? Past cycles show that once altcoin season starts, capital inflows broaden quickly across sectors. Leaders are usually fundamental narratives: new themes pull first, legacy tokens follow. This cycle’s potential hotspots:

• Layer 1s and DeFi revivals
• RWA tokenization integrating on-chain liquidity with TradFi
• AI-driven dApps boosting demand for compute and data tokens
• Cross-chain infrastructure (LayerZero, Chainlink CCIP) gaining traction and institutional attention

V. Uptober Ahead: Q4 Market Outlook

With the September cut in place, attention now shifts to the October FOMC meeting. CME FedWatch shows rising bets on another 25 bps cut by month-end, barring unexpected economic improvement. Goldman Sachs projects cuts in September, October, and December, followed by two more in 2026, taking rates down to 3.0%–3.25%. This path aligns with the Fed’s dot plot. Q4 2025 could deliver 75 bps of cumulative easing — fertile ground for risk assets.

Seasonal patterns also support optimism. Crypto circles call October “Uptober”: since 2013, Bitcoin has averaged +22.9% gains in October. Seasonal flows — capital rotation before year-end, reduced sell pressure — combine with psychology, as optimism revives after Q3 consolidation. When macro and seasonality align, a self-fulfilling rally effect often emerges.

Risks remain. Fed officials were divided in September, signaling that future cuts aren’t guaranteed. Stronger-than-expected data could slow or pause easing. And after 2025’s massive rally, Bitcoin may face consolidation or pullbacks as profit-taking sets in.

Overall, Q4 2025 has the ingredients for a major crypto rally. Policy easing, institutional inflows, and sentiment shifting from caution to FOMO converge with fresh narratives like RWA tokenization, ETH spot ETF momentum, and U.S. corporates entering blockchain. Unless derailed by black swans, the quarter looks set for optimism. As Bitcoin grinds higher and consolidates, capital rotation into quality altcoins could ignite the long-awaited “altcoin season.”

VI. Conclusion: Balancing Hype with Discipline

The crypto market stands at a thrilling juncture: macro rates are turning down, sentiment is warming, Bitcoin is hitting new highs, and altcoins are rotating upward. Q4 2025 could bring a full-fledged altcoin season. We remain cautiously optimistic: moderate Fed easing will support liquidity, Uptober’s seasonal strength may repeat, and altcoins could broadly outperform Bitcoin. The quarter promises both excitement and challenge.

Yet history reminds us: the more euphoric the market, the greater the need for discipline. Altcoin seasons create both fortunes and failures. Early investors in quality projects can see multiples on their portfolios, but speculative froth often drives weak tokens to unsustainable highs — leaving latecomers exposed.

Every altcoin season is both opportunity and trap. Institutional treasuries and whales are already accumulating, signaling confidence. But in the end, survival depends on personal discipline — independent thinking, restraint against greed and fear, and balancing risk with reason. These are the skills investors must master to emerge intact when the music stops.

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