TradFi Ruled Crypto In 2025, Will Fed Rate Cuts Trigger New Highs In 2026?

2025 was a blockbuster year for Bitcoin (BTC) and the wider crypto market as crypto-friendly legislators platformed growth-focused regulation and Wall Street finally accepted Bitcoin, Ether (ETH), and numerous altcoins as a valid asset class worthy of inclusion in an investment portfolio. 

The global bid on Bitcoin, Ether and Solana’s SOL (SOL) token was near immeasurable, with total net flows into the spot Bitcoin ETFs reaching $57 billion and the total net assets across the ETFs reaching $114.8 billion. 

Going into 2026, the real question is, will the pace of institutional, corporate and government-level adoption, which were critical price drivers in 2025, continue? Since October, the robust inflows to the spot Bitcoin ETF tapered off and, in some cases, turned into a sellers’ market for weeks on end, and this was followed by a 30% correction in BTC and 50% in Ether.

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

Beyond the ETF flows and demand across spot markets like Binance and Coinbase, investor sentiment regarding the immense size of the AI industry buildout and the performance of the tech-heavy S&P 500 is likely to have a direct impact on crypto markets. 

The AI buildout, company valuations, fundraising, IPO performance, and whether datacenter hyperscalers continue to propel the equities markets alongside MAG7 will remain at the forefront of everyone’s mind. 

In the interview, Salmond explained that rapid balance sheet expansion was a strategy that supercharged tech-related equities in 2025 as hyperscalers spent double-digit billions on data centers, compute, Nvidia GPUs and energy. At some point in 2026, the expectation will be that these companies demonstrate that they can monetize their investments, or at least finance the expansions from their internal cash flow. 

In the latter half of 2025, Oracle, Meta and Nvidia saw their stock prices fall as the market questioned whether there was a chance that some of these companies’ free cash flow could go negative. If investors smell smoke related to debt-heavy, cash-poor AI and quantum computing companies in 2026, there’s likely to be some negative reaction. How these shockwaves carry over to the SPX, DOW, and, by proxy, crypto is something investors will need to keep on the watch list. 

Will passing the Clarity Act supercharge altcoins, DeFi and large caps?

A bullish event worth watching in the early part of 2026 will be whether or not the Clarity Act becomes law. The crypto lobby aimed to have this act passed into law before the end of the year, but the lengthy government shutdown delayed progress on hammering it out. 

If passed, the Clarity Act will provide clearer rules and the necessary environment for FinTech innovators to sandbox in the US, and the hope is that more offshored crypto businesses will headquarter back in the United States. 

It will define which regulatory bodies (SEC and CFTC) have jurisdiction over various crypto assets, depending on whether they are classified as securities or commodities. There’s also a strong emphasis on consumer protections, and a better framework in this area could provide the necessary transparency that businesses and consumers need to confidently invest in crypto assets. 

Will a Trump-aligned Fed chair and easy money policy turbocharge markets?

The Federal Reserve’s policy shift is expected to further morph into an easy money regime, and President Trump’s early 2026 Fed chair selection is anticipated to bring up to 100 basis points in rate cuts. 

According to Salmond, 

Salmond explained that” the job market is softening and this cooling trend is predicted to carry on in 2026. The ‘transitory’ impact of the Trump tariffs has resulted in elevated goods and services costs, health insurance premiums will rise, and retail investor confidence may drop as layoffs are announced, consumer debt rises, and disposable income falls.”

At the same time, “investors expect Fed rate cuts to result in lower mortgage rates, compel banks to loosen the purse strings for lending, and lure consumers to go buy more stuff. But, the potential return of easy money policy and big government spending essentially confirms that the US is kicking the debt bomb further down the road.” 

Related: JPMorgan explores crypto trading for institutional clients: Report

In Q1 2026, the dilemma investors will have to contend with is whether there are signals that prove that the Fed’s easy money trade is being front-run and possibly sold on confirmation, or will the evolving Fed policy also reinvigorate the bull market seen across equities in 2025 and extend to crypto?

Investors who prioritize optionality and a nimble footprint should be able to avoid some of the pitfalls of a narrative and speculation-driven market, where the MAG7 and AI markets could prove to be overvalued. 

On paper, the big picture view for 2026 is bullish, especially when considering the Trump economic mandate, Fed policy, and crypto-friendly regulation, but it’s the unknown outcomes of the AI buildout and the actual impact of rate cuts on the consumer and economy that are going to determine the direction markets take in Q1 and Q2.   

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