TradFi Buys Crypto in 2025, Fed Rate Cut to New Highs in 2026?

In the year 2025 was a blockbuster year for Bitcoin (BTC) and the broader crypto market as crypto-friendly lawmakers passed regulations focused on growth and Wall Street finally accepted Bitcoin, Ether (ETH) and several altcoins as a valid asset class to include in an investment portfolio.

Global bidding on Bitcoin, Ether and Solana's SOL (SOL) token was immeasurable, with total net flows into spot Bitcoin ETFs reaching $57 billion and total net assets in ETFs totaling $114.8 billion.

As we head into 2026, the key question is whether the pace of adoption at the institutional, corporate and government levels that were critical price drivers in 2025 will continue. Since October, the strongest income-to-the-spot Bitcoin ETF has closed and in some cases turned into a sellers market for weeks on end, and this has seen a 30% correction in BTC and a 50% correction in Ether.

In an interview with Schiwab Network's Nicole Petallides, Cointelegraph's Head of Markets Ray Salmond said that the performance of the crypto market in early 2026 will depend on several factors.

“Given that narratives around AI, Fed rate cuts, strategic Bitcoin hoarding and ETF flows have fueled the market, I'm curious to see if the same narratives drive prices higher in 2026 or will a new narrative emerge to drive buyers back into the markets?”

.@Cointelegraph Head of Markets Ray Salmond told @NPetallides that he expects demand for bitcoin, ethereum and solana in the spot and ETF markets to set the tone for the industry in 2026.

For more market news, follow: pic.twitter.com/ZCp1EIXyUh

— Schwab Network (@SchwabNetwork) December 22, 2025

Beyond ETF flows and interest in spot markets like Binance and Coinbase, investor sentiment regarding the massive scale of the AI ​​industry's construction and the performance of the tech-heavy S&P 500 could have a direct impact on crypto markets.

Building AI, company valuations, fundraising, IPO execution and datacenter hyperscalers will remain at the forefront of everyone's minds as they continue to expand equity markets alongside MAG7.

In the interview, Salmond said rapid balance sheet expansion is a strategy that will boost tech-related stocks in 2025 as hyperscalers spend double-digit billions on data centers, compute, NVIDIA GPUs and energy. Sometime in 2026, the expectation is that these companies will demonstrate that they can monetize their investments, or at least finance expansions from their internal cash flow.

In the year In the latter half of 2025, Oracle, Meta, and Nvidia saw their stock prices fall, with the market questioning the possibility of negative free cash flow for these companies. If investors smell smoke associated with debt-heavy, cash-poor AI and quantum computing companies in 2026, there could be some negative feedback. How these shock waves affect the SPX, DOW and, by proxy, crypto is something investors need to keep on their watchlist.

Passing the Clarity Act on high-paying altcoins, DeFi and large caps?

A critical event to be seen in the early part of 2026 will be whether or not the bill becomes law. The crypto lobby aims to have the act signed into law before the end of the year, but the prolonged government shutdown has delayed the process of repealing the act.

If passed, the Clarity Act will provide clearer regulations and a necessary environment for fintech innovators to enter the sandbox in the US, and the hope is that offshore crypto businesses will return their headquarters to the United States.

It defines which regulatory bodies (SEC and CFTC) have jurisdiction over various crypto assets, whether they are classified as securities or commodities. There is also a strong focus on consumer protection, and a better framework in this area could provide the necessary transparency that businesses and consumers alike need to invest in crypto assets with confidence.

Will a Trump-aligned Fed chairman and easy monetary policy turbocharge markets?

The Federal Reserve's policy shift is expected to shift toward easier monetary management, and US President Donald Trump's decision in The election of the Fed chairman in early 2026 is expected to bring up to 100 points of rate cut.

According to Salmond,

“Crypto investors view Fed rate cuts as bearish for their risk assets, but we've got a tale of two cities where the data contradicts even more bearish views.”

“The labor market is softening and this cooling trend is projected to continue into 2026. The ‘pass-through' effect of Trump's tariffs has led to higher costs of goods and services, increased health insurance premiums, and as retail investors announce a slowdown, consumer debt may increase and disposable income may decline.

At the same time, “Investors expect the Fed to cut interest rates, which will lead to lower lending rates, banks to loosen their wallets for lending and consumers to buy more things. However, easy monetary policy and a return to large government spending will ensure that the United States is throwing the debt bomb further down the road.”

Related: JPMorgan examines crypto trading for institutional clients: report

In Q1 2026, the challenge investors will have to face is whether there are signs that the Fed's easing of monetary policy is underway and perhaps a sell-off in confirmation, or will revised Fed policy revive the 2025 bull market in equities and into crypto?

Investors who prioritize alternatives should be able to avoid some of the pitfalls in narrative and speculative markets where MAG7 and AI markets can be overvalued.

On paper, the big picture outlook for 2026 is promising, especially when considering Trump's economic mandate, Fed policy and crypto-friendly regulation, but it will be the impact of the AI ​​build and the actual devaluation that will determine the direction markets take in Q1 and Q2.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision. While we strive to provide accurate and up-to-date information, Cointelegraph does not guarantee the accuracy, completeness or reliability of any information in this article. This article may contain forward-looking statements that are subject to risks and uncertainties. Cointelegraph shall not be liable for any loss or damage arising from reliance on this information.