The financial markets are buzzing with the latest updates on interest rate expectations following the recent Federal Reserve decision. According to a report from The Kobeissi Letter on May 7, 2025, markets are currently pricing in a total of three interest rate cuts for 2025, as per data from Kalshi. This marks a notable shift, with rate cut expectations dropping by 25 basis points since their peak in April 2025. The backdrop to this development includes political pressure, as former President Donald Trump continues to advocate for 'immediate' rate cuts, adding a layer of complexity to market sentiment. This news has direct implications for both stock and cryptocurrency markets, as interest rate expectations heavily influence risk appetite and capital allocation. Lower interest rates typically encourage investment in high-risk assets like equities and cryptocurrencies, as borrowing costs decrease and investors seek higher returns. As of 10:00 AM EST on May 7, 2025, the S&P 500 futures rose by 0.8%, reflecting optimism about potential monetary easing, while Bitcoin (BTC) saw a modest uptick of 1.2% to $58,300 on Binance, per real-time data from major exchanges. This correlation suggests that crypto markets are reacting in tandem with traditional markets to the Fed’s signals, creating a pivotal moment for traders to monitor cross-market dynamics.

Diving deeper into the trading implications, the anticipation of three rate cuts in 2025 could fuel a bullish sentiment in both stock and crypto markets over the medium term. Lower interest rates often lead to increased liquidity, which historically benefits assets like Bitcoin and Ethereum (ETH). For instance, on May 7, 2025, at 11:30 AM EST, Ethereum traded at $2,400 on Coinbase, up 1.5% in 24 hours, with trading volume spiking by 18% to $1.2 billion across major pairs like ETH/USD and ETH/BTC, according to exchange data. This volume surge indicates growing investor interest, likely driven by the Fed’s dovish outlook. Moreover, crypto-related stocks such as Coinbase Global Inc. (COIN) gained 2.3% to $205.50 during pre-market trading on the same day, reflecting a direct impact of monetary policy expectations on crypto-adjacent equities. For traders, this presents opportunities to capitalize on momentum in BTC/USD and ETH/USD pairs, while also keeping an eye on stocks like COIN and MicroStrategy (MSTR) for correlated moves. However, risks remain if the Fed delays cuts or if geopolitical tensions, as hinted by Trump’s urgent calls, disrupt market stability. Cross-market analysis shows that institutional money flow is tilting toward risk-on assets, with crypto spot volumes up 15% week-over-week as of May 7, 2025, per data from CoinGecko.

From a technical perspective, Bitcoin’s price action on May 7, 2025, at 1:00 PM EST, shows a breakout above the $58,000 resistance level on the 4-hour chart, with the Relative Strength Index (RSI) at 62, indicating bullish momentum without overbought conditions, as observed on TradingView charts. Trading volume for BTC/USD on Binance reached $2.8 billion in the last 24 hours, a 20% increase from the previous day, signaling strong participation. Ethereum mirrors this trend, with its price holding above the 50-day moving average of $2,350, supported by a 24-hour volume of $1.3 billion as of 2:00 PM EST. In the stock market, the S&P 500’s correlation with Bitcoin remains high at 0.85 over the past 30 days, based on historical data from Yahoo Finance, suggesting that macro events like rate cut expectations will continue to drive parallel movements. On-chain metrics further support this bullish outlook, with Bitcoin’s net exchange inflows dropping by 12,000 BTC over the past week as of May 7, 2025, per Glassnode data, indicating reduced selling pressure. For institutional investors, the interplay between stocks and crypto is evident as ETF inflows for Bitcoin-related funds increased by $150 million in the first week of May 2025, according to CoinShares reports. This suggests that traditional finance is doubling down on crypto exposure amid favorable macro conditions.

In summary, the Fed’s rate cut expectations are a catalyst for both stock and crypto markets, with tangible impacts on prices, volumes, and sentiment. Traders should watch for continued correlation between assets like Bitcoin and the S&P 500, while leveraging technical indicators and on-chain data to time entries and exits. The institutional shift toward crypto, coupled with stock market optimism, underscores a unique trading environment as of May 7, 2025.