Macro: The Setup for a Fourth-Quarter Rally

September was a month of contradiction. On one hand, the Federal Reserve’s first rate cut since 2023 and a weakening dollar ignited optimism across risk assets. On the other hand, Washington’s budget gridlock triggered a partial government shutdown that slowed the release of critical data and disrupted key regulatory timelines, including pending spot ETF approvals. Between those two forces—monetary easing and political dysfunction—the crypto market found itself both energized and restrained, navigating one of the more complex backdrops in recent months.

The Fed’s quarter-point rate cut to a 4.00–4.25% target range was the headline macro event of the month. While the move was modest, it confirmed that policymakers are shifting toward an insurance-cut posture, seeking to avoid a sharper slowdown rather than to fight inflation. Private payroll data from ADP, showing near-zero net job creation after a multi-year deceleration, reinforced the Fed’s view that labor demand is cooling.

Rate markets have already priced in two additional cuts by year-end, with Fed fund futures implying an 87% probability of another 50 basis points of easing by December. The dollar has weakened, gold hit new all-time highs, and real yields declined across the curve, conditions historically supportive for Bitcoin. The pullback in the Treasury General Account and the passing of quarter-end liquidity constraints have also removed short-term headwinds. In our view, the setup points toward BTC-led strength through October, although liquidity may tighten again heading into November.

Washington Gridlock: A Market on Pause

The federal government’s partial shutdown had outsized consequences for digital assets. The immediate effect was a freeze on administrative reviews at the Securities and Exchange Commission, delaying the approval of several spot crypto ETFs that were otherwise expected to list in early October. With most SEC staff furloughed, only “emergency” market stability issues are being processed.

Meanwhile, the Senate Banking Committee’s long-anticipated markup of the Responsible Financial Innovation Act—the first major crypto market structure bill in the chamber—was postponed. The same holds for the Senate Agriculture Committee’s draft bill governing CFTC oversight. The one area where work continued was crypto taxation, where Senate Finance Committee leaders renewed calls for updated tax code clarity. As Chair Mike Crapo put it, lingering uncertainty is undermining compliance and making the United States a less competitive venue for crypto business formation.

The GENIUS Act, which became law in July, continues to cast a long shadow over the stablecoin sector. While the law established a federal framework, it delegated rulemaking to agencies now operating with skeleton crews. Banks and crypto firms remain at odds over whether exchanges can offer stablecoin yields. The law prohibits issuers from paying interest directly but leaves room for affiliated entities to do so—a loophole that the banking sector is aggressively lobbying to close.

Stablecoins: Policy Meets Profit

Stablecoins once again proved to be crypto’s most stable growth engine. Total capitalization rose ~3.5% in September to ~$290 billion.

stablecoin market cap approaches $300B in September 2025

Yet the Fed’s rate cut had a clear downside for issuers, trimming roughly $500 million in annualized interest revenue from reserve portfolios. Tether alone could lose $325 million in yield income, while Circle’s USDC may see a $160 million reduction.

2025 declining interest rates hurt stablecoin profits.

The development highlights how monetary policy now directly affects stablecoin economics. The very instruments that make reserves safe—short-term Treasurys and money market funds—are rate-sensitive. When the Fed cuts, yield compresses, and so do profits. Still, the macro backdrop remains favorable for sector expansion, especially as new infrastructure bridges stablecoins into the traditional banking world.

SWIFT’s decision to embed a blockchain-based shared ledger into its core network represents a milestone in that bridge-building process. After years of pilots, the messaging giant formally committed to integrating stablecoin and tokenized fund settlement for over 11,000 financial institutions. September’s stablecoin transaction volume rose 7% to $3.07 trillion, exceeding major retail payment networks. The move suggests that the road to mainstream adoption now runs through established financial rails rather than around them.

Tether, Plasma, and the “Dollar Internet” Trade

Tether’s reported $15–20 billion capital raise dominated headlines. If completed, it would value the company near $500 billion—roughly on par with JPMorgan Chase. The raise follows Tether’s $1 billion Bitcoin purchase at quarter-end and reinforces its strategy of converting profits into hard assets. USDT’s market share climbed to 58% as futures traders continued to favor it for collateral and settlement.

The rally in Tether-linked projects also made waves. Plasma’s $XPL token, backed by both Tether and Bitfinex leadership, launched to dramatic volatility, doubling before retracing 50% amid profit-taking. However, TVL has been steady.

While sentiment cooled, on-chain data showed most of the selling came from early investors locking in gains, not insider sales. Fundamentally, Plasma remains one of the few operational stablecoin-centric chains with active DeFi adoption. With Tether’s expansion plans accelerating, the market continues to treat Plasma as a leveraged play on the “dollar internet” thesis.

USD1 and the Geopolitics of Dollarization

At the Token2049 conference in Singapore, representatives from World Liberty Financial—the DeFi platform controlled by the Trump family—outlined plans to link real-world assets with its USD1 stablecoin. The project’s structure is notable: BitGo handles issuance and custody, while World Liberty Financial operates the brand. This arrangement may require restructuring once the GENIUS Act takes effect, as BitGo’s subsidiaries are not currently classified as qualified issuers under the law.

Regulatory compliance aside, USD1 faces credibility issues. Its attestations are outdated, and on-chain data shows 78% of tokens are held offshore, with many linked to exchange wallets. That’s an unusual profile for a product marketed as a U.S. financial instrument. USD1 was also used in the $2 billion investment from Abu Dhabi–backed MGX into Binance, highlighting the token’s growing use in cross-border deals but also raising questions about oversight.

From a macro perspective, exporting dollar-backed stablecoins has strategic benefits—it strengthens the dollar’s global reach—but it also conflicts with domestic policy aims to weaken the currency for trade competitiveness. This tension defines the next phase of stablecoin policy: whether the U.S. views global dollarization through crypto rails as a feature or a liability.

ETFs, DATs, and Institutional Entry Points

Traditional finance continued its gradual convergence with crypto. CME Group announced plans for 24/7 bitcoin and ether derivatives trading, closing the final gap between legacy markets and crypto’s nonstop structure. SWIFT’s blockchain initiative deepened that link further, while BlackRock filed for a Bitcoin premium income ETF aimed at yield-seeking investors. Thailand followed suit by expanding its regulatory framework to permit multi-asset crypto ETFs.

Corporate treasuries also remained active buyers. Metaplanet added 5,288 BTC, bringing its holdings to 30,823 BTC and ranking it among the world’s largest public bitcoin holders. The purchase lifted its full-year profit forecast nearly 90%. Tether mirrored the strategy with another $1 billion BTC acquisition. Together, these moves solidify Bitcoin’s role as both a corporate reserve asset and a monetary hedge in a low-yield environment.

Digital Asset Treasuries (DATs) continued evolving as a bridge between equity and crypto markets, though early deals reveal structural inefficiencies. The Avalanche DAT’s merger with Mountain Lake Acquisition Corp was priced at a 23% discount to NAV, echoing similar markdowns seen in earlier SPAC-style DATs. While these vehicles promise liquidity and on-chain exposure, long closing timelines and limited price premiums challenge their near-term appeal.

Looking Ahead

September confirmed two things: monetary easing is back, and crypto has entered a policy-heavy era. The Fed’s pivot supports digital assets in the short term, but Washington’s regulatory overhang and uneven data flow create volatility around execution timelines. The market’s core drivers—stablecoin growth, institutional integration, and the redefinition of the dollar through crypto rails—remain intact.

As October begins, the focus shifts to whether risk assets can sustain momentum as real yields fall. With liquidity conditions improving and political uncertainty slowly clearing, the fourth quarter may offer crypto a window of opportunity before year-end fiscal pressures return.

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