Probability Of September Rate Cuts Rises Above 92%, Here’s What It Means For Bitcoin And Crypto
The next meeting for the Federal Open Market Committee (FOMC) is still more than a month away, but it is already garnering a lot of attention due to its importance and impact on the crypto market. Bets are already being placed on what will be the outcome of the meeting and subsequent announcement, with the majority currently leaning toward a possible rate cut, something that President Donald Trump has been vying for over the last few months.
September FOMC Meeting Votes Heat Up
The last FOMC meeting had seen the start of a positive trend when the Fed had decided not to hike interest rates. There had been no cuts in the rates on July 30, but the decision to keep rates at their current level enabled the markets to stay quite steady, triggering modest volatility in risk markets such as Bitcoin and crypto.
The next FOMC meeting is now set for September 17 and is already drawing bets from market stakeholders. According to the FedWatch Tool on the CME Group website, the majority believe that the Fed will actually bend and decide to cut interest rates during this meeting.
It shows that there is a 92.2% probability that the Fed will decide to actually cut rates, a move that could see interest rates crash toward 4%. There is a 7.8% probability that the Fed will decide to actually leave interest rates unchanged again, while there is a 0% chance that there will be a hike in the rates.
Currently, the interest rates are still sitting at 4.25%-4.5%, and while this is not the highest they have been, it remains quite high for risk markets. This has led to lower participation from investors as they take a more conservative stance toward their investments.
What A Cut Means For Bitcoin And Crypto
Historically, a cut in interest rates is bullish for risk assets, and the likes of Bitcoin and the crypto market tend to benefit greatly from this. This is because an announcement of rate cuts triggers increased volatility in the market, and the new liquidity being pumped into the ecosystem as a result of the positive news leads to price hikes in Bitcoin and the crypto market.
One thing that could determine how high the Bitcoin and crypto market could rise in response is how much the Fed decides to cut rates. An example of a dramatic rate cut that led to a massive rally was back during the COVID-19 lockdown in 2020, when the Fed had cut rates from 1.58% to 0.05%. What followed was the most explosive bull market in the history of Bitcoin and crypto so far.
Given this, a Fed rate cut would be very bullish for the Bitcoin price. In fact, depending on how much the rates are cut, the response could trigger massive volatility and ultimately lead to the digital asset reaching new all-time highs.
Featured image from Unsplash, chart from TradingView.com
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