Q4 interest rate cut expectations: Will it catalyze the growth of altcoins and treasury stocks?

Source: Merkle3s Capital Introduction: With Federal Reserve Chairman Powell signaling dovishness, the market has almost deemed the first rate cut in September a done deal. However, the real point of contention lies in whether the Fed will continue to cut rates in Q4. How will the pace of these rate cuts affect Bitcoin, Ethereum, and treasury stocks?

Recent data provides us with clues:

• The FedWatch tool has priced the probability of a 25bp rate cut on September 17 at 87.3%;

• ETF fund flows show that ETH is still attracting a lot of money, while BTC is in a state of fund outflow;

• The funding rate shows a divergence, with ETH being significantly stronger than BTC;

• Several treasury stocks in the US stock market have fluctuated sharply recently, implying an early interpretation of the Q4 market.

This article will combine macroeconomic policies, capital flows and individual stock performance to try to answer the question: Is the frenzied copycat season at the end of the year already on the way? Chapter 1 Macroeconomics and Interest Rate Cut Expectations 1.1 The First Rate Cut in September is Almost Certain According to data from the CME FedWatch tool, as of August 25: 400–425bp (25bp cut) probability: 87.3% 425–450bp (unchanged) probability: 12.7% In other words, the market has almost fully priced in a September rate cut. The real focus of the debate has shifted to whether there will be further rate cuts in October and December.

1.2 Uncertainty of the rhythm of Q4

Looking back:

• October 29 meeting: The market has different views on the "second interest rate cut", with a probability of 50.6% for a cut to 375-400bp and a probability of maintaining it at 400-425bp at 42.9%;

• This means: September is the starting point, but Q4 will be the real battleground.

  1.3 Implications for Risky Assets

  • The rate cut path is brought forward → expectations of liquidity return are increasing;

  • For risky assets, BTC is the liquidity anchor, and ETH is the primary source of capital inflows;

  • If consecutive rate cuts are confirmed in Q4, altcoins and related small-cap stocks will be the biggest beneficiaries of this capital game. It's important to emphasize here: rate cut pricing ≠ liquidity release. Institutional funds are still waiting to see macroeconomic data (employment, CPI). A true signal for full-scale position building may not emerge until after the FOMC meeting at the end of September. Chapter 2: Capital Flows and ETF Data: ETH Leads the Way 2.1 Overall Capital Flows: Clear Divergence The latest statistics from CoinShares show that overall crypto investment products saw a net outflow of over $1.4 billion last week, the largest single-week outflow since March.

    However, the internal structure is extremely differentiated:

    • ETH product funds net inflow + $2.5 billion

    • BTC product funds net outflow - $1 billion

    

    This "one rises while the other falls" pattern reflects the subtle changes in institutions' allocation of crypto assets:

    • BTC is regarded as the cornerstone of the broader market, but short-term funds have not increased their holdings but instead reduced them;

    • ETH is receiving structural incremental funds due to its upcoming technological upgrade and increased ETF trading activity.

    2.2 ETF Liquidity Data Comparison

    From the perspective of US spot ETF data, the difference is more obvious:

    • BTC ETF: Recently, net outflows have continued to be recorded, with the highest single-day outflow exceeding US$500 million;

    

    

    This means that funds are shifting from "one-sided bets on Bitcoin" to "the Ethereum narrative" and gradually penetrating into other asset classes.

    2.3 Funding Rate Verification

    Further observation of the funding rate can verify this trend:

    • BTC perpetual contract funding rate: generally maintained at around 0.21%, indicating that long sentiment is flat;

    • ETH perpetual contract funding rate: even recorded negative values ​​on some exchanges (low long cost, funds tend to be long), and maintained at +0.0063% on MEXC, funds are still betting on ETH's rise.

    

    2.4 Summary

    Comprehensive fund flows, ETF data and funding rates:

    • ETH's strength is replacing BTC as the dominant source of fund inflows;

    • BTC funds are temporarily on the sidelines, but remain the benchmark anchor for risk appetite;

    • 3.1 BMNR - ETH Whale + MSTR Strategy

      • Holdings: 1,713,899 ETH, based on $4,561.53, with a total market value of approximately US$7.82 billion, accounting for 1.43% of the total Ethereum supply. Interpretation: BMNR has a huge holding volume, almost equivalent to a mini version of ETH ETF, and its price trend is highly bound to ETH. 3.2 SBET — A Copycat ETH Mirror Holding: 800,000 ETH, valued at $4,561.53, with a total market capitalization of approximately $3.65 billion, representing 0.67% of the total ETH supply. Interpretation: While ETH holdings are small, the asset structure is simpler. 3.3 DYNX — New Narrative + ETH Positions: 345,362 ETH, with a market capitalization of approximately $1.623 billion, representing 0.28% of the total ETH supply. Interpretation: DYNX's logic is "new narrative + ETH holdings." Although much smaller than BMNR/SBET, DYNX's leverage is higher when compared to its ETH holdings based on its circulating market capitalization. 3.4 UPXI — An Indirect Investment in the Solana Ecosystem Holdings: 2,000,000 SOL, with a market capitalization of approximately $400 million. Interpretation: Unlike the previous three companies, UPXI holds SOL rather than ETH. It is an indirect investment in the Solana ecosystem. Appendix: Comparison of Four US Treasury Stocks Overall, the logic behind these stocks is similar to that of ETFs: driven by token holdings and a combination of risk premiums. Once the ETH and altcoin season begins in Q4, they will become another battleground for capital.

        Conclusion and Outlook

        From the macro perspective to the blockchain, and then to the US stock and blockchain stocks, the signals are gradually converging in one direction:

        1. Macro Level:

        • The Federal Reserve's first interest rate cut in September is almost certain. Whether there will be consecutive rate cuts in Q4 will determine the pace of liquidity release.

        • The bond market and the US dollar have already reflected the expectation of capital inflows. 2. Capital Flows: BTC ETFs experienced continued net outflows (-$1 billion), indicating the market is avoiding short-term pressure on Bitcoin. ETH ETFs led the way (+$2.5 billion), with funds clearly shifting toward ETH, demonstrating both compelling narrative and liquidity. 3. Market Pricing: BTC maintained its market anchor, but lacked incremental buying. ETH has taken the lead in strengthening, becoming the primary focus of capital allocation. Early signs of altcoin season have emerged, and Q4 is expected to see a larger-scale rotation. 4. US Stock-Chain Stock Mapping: BMNR: High financial leverage amplifies risk and returns. SBET: A mid-sized, more stable ETH proxy. DYNX: Small-cap with a high position, a potential "monster stock." UPXI: The Solana ecosystem narrative. Their volatility has amplified market expectations for mainstream assets like ETH and SOL. Looking Ahead to Q4: Optimistic Scenario: The Federal Reserve enters a period of continuous rate cuts → Rapid liquidity release → ETH continues to attract capital, and altcoins and treasury stocks rally in unison. Neutral Scenario: The rate cut path is delayed → BTC remains volatile → ETH is relatively strong, but the altcoin rally is delayed until the end of the year or Q1 2026. Risk Scenario: If inflation rebounds or employment data exceeds expectations, the Federal Reserve is forced to slow rate cuts → Short-term funds flow back into the US dollar and bond markets → Cryptocurrencies and blockchain stocks come under renewed pressure.

        Summarize in one sentence:

        The core logic of Q4's market is that ETH leads → altcoins take over → treasury stocks resonate. "Paper tiger"-like pullbacks are just noise on the road to a bull market.