Fed Rate Cut Speculation Heats Up: Are Crypto Markets In For A September Surprise?

As the Federal Reserve’s September meeting approaches, market participants are closely watching for signs of a potential interest rate cut.

What Happened: According to new data from prediction market Polymarket, bettors are placing significant wagers on the Fed’s next move, with implications for both traditional and cryptocurrency markets.

The Polymarket odds for the September 2024 Fed meeting show a 75% chance of a 25 basis point (bps) decrease in interest rates.

This represents the most likely outcome according to market participants, with $1,210,359 bet on this scenario.

However, a more aggressive 50+ bps cut isn’t off the table, with a 20% probability assigned to this outcome and $1,840,297 in bets placed.

Interestingly, the market gives only a 6% chance of no change in rates, suggesting strong consensus around some form of rate cut.

Also Read: Bitcoin Back Above $61,000 As ETFs Record Fifth Straight Day Of Inflows

The least likely scenario, according to bettors, is a rate hike, with less than 1% probability of a 25+ bps increase.

These predictions align with a broader market expectation of monetary policy easing in 2024.

A separate Polymarket question on the total number of Fed rate cuts this year shows 34% of bettors expecting three 25 bps cuts (75 bps total), while 22% are betting on four cuts (100 bps total).

For the cryptocurrency industry, the potential for rate cuts is particularly significant. Lower interest rates typically lead to increased liquidity and risk appetite in financial markets, which could drive more capital into crypto assets.

Bitcoin BTC/USD and other major cryptocurrencies like Ethereum ETH/USD have historically shown sensitivity to macroeconomic policy shifts, often benefiting from expansionary monetary conditions.

What’s Next: As the crypto community eagerly anticipates these potential rate cuts, many industry leaders and investors are preparing to gather at Benzinga’s Future of Digital Assets event on Nov. 19.

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