Fed rate cut, 401K investments: What's driving the record rally in bitcoin, Ethereum
The price of Ethereum rose 1.93 per cent from the previous day's close to $4,745.73 apiece at 10:50 am IST on Thursday, slightly down from a high of $4,7890 apiece, earlier in the day.
Among stablecoins — dollar-backed cryptocurrencies — the USDT Tether was up 0.02 per cent to $1 apiece. While the rate cut expectations may be the latest trigger, broader support by the Trump administration in the form of a legislative and policy push are also driving the crypto rally, say analysts.
US Treasury Secretary Scott Bessemer in an interview with Bloomberg on Wednesday suggested that the Fed should have cut rates by now, and he expects a 50 basis points (bps) rate cut in the September meeting. 'If you look at any (economic) model… we should probably be 150, 175 basis points lower,' he added.
Bessent's call for a rate cut in September and 'suggestions that the Fed funds rate in 150-175 bp too high is fuelling expectations of looser policy,' said Tony Sycamore market analyst at financial services company IG, in a post on X.
BITCOIN SMASHES RECORD $123,682, ETHEREUM NEARS ALL-TIME HIGH
Bitcoin has just smashed through to a new all-time high of $123,682 (+3.71%), exceeding its previous peak of $123,236, set exactly one month ago on July 14, 2025. Meanwhile, Ethereum is closing in on its own record,… pic.twitter.com/ZAfGp9gBB7
— Tony Sycamore_IG (@Tony_Sycamore) August 13, 2025
Among US indices, the S&P 500 was up 0.32 per cent while the Dow Jones surged 1.04 per cent on Wednesday.
The Trump administration in an order on August 7, opened the door for 401K investment in cryptocurrencies. In the executive order titled 'Democratizing Access to Alternative Assets for 401(K) Investors', signed by US President Donald Trump, it was stated that his 'Administration will relieve the regulatory burdens and litigation risk that impede American workers' retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement.'
Under the order, alternative assets are defined as equity, debt and other financial instruments not traded on public exchanges.
The order directs the US Secretary of Labor to reconsider guidance on rules regarding 401(K) investments. According to the Investment Company Institute, mutual funds currently comprise the bulk of assets under 401(K) — an investment provision that allows US citizens to deduct a part of their payout and invest them in assets allowed by the government for retirement savings.
The new order has led to a surge in institutional investment with the Trump administration seen to be delivering on its promise of being crypto friendly, after passage of the GENIUS Act for stablecoin regulation as well as US markets regulator SEC's plans to ease guidelines for crypto and blockchain trading.
'Bitcoin's rally is being powered by institutional flows and macro tailwinds. Corporate treasuries like MicroStrategy and Block Inc. continue to buy Bitcoin,' said Sycamore, citing Bessent's rate cut call and Trump's 'recently signed executive order allowing alternative assets, including cryptocurrencies, to be included in 401(k) retirement funds'.
According to Sycamore, Bitcoin could cross the $150,000 threshold if there's 'a sustained break above $125,000.'
Ethereum, which is up 27 per cent so far in August, after rising 48 per cent in July, is also poised to 'take another led higher towards $5,500,' he added.
Oanda market analyst Eliot Manier said he expects Ethereum to consolidate around $4,200 as he expects some profit taking at current levels which are close to the 2021 record of $4,800 apiece. 'Sentiment is more than euphoric, but this may keep on going for a while before it cools down,' he said.
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