Bitcoin’s fate hangs on Jerome Powell’s every word as traders expect the Federal Reserve to announce its first rate cut in over a year.
Markets are pricing in near-certainty of a cut at today’s Federal Open Market Committee, with the CME FedWatch tool flashing 94% odds of a 0.25% rate cut, and a 6% chance of an even deeper 0.50% slash.
Polymarket punters give those cuts a 90% and 8% chance respectively.
Market watchers, however, reckon that the quarter-point cut is already baked into prices — and it could bring selling with it.
“There is a high chance that the FOMC meeting could be a sell-the-news event especially if the cut is only 25 bps since it’s already fully priced in,” André Dragosch, European head of research at Bitwise, told DL News.
“Sentiment is also relatively euphoric going into this meeting which is why I think there is a relatively high chance for a short-term pull-back.”
Others aren’t so sure.
“I wouldn’t expect significant price moves with a quarter-point cut as that would be in line with what market participants expect,” Carlos Guzmán, analyst at GSR, told DL News.
“However, any decision that strays from that could cause higher volatility.”
Bitcoin has climbed up 2.5% this week to $116,000, while Ethereum rose 3% to about $4,500 this week.
After months of trading in lockstep with the Nasdaq and ignoring its “digital gold” narrative, Bitcoin is in need of a rate cut to see if it can attract fresh capital.
Lower rates mean cheaper money floods into risk assets, which has historically favoured cryptocurrencies.
But if the Fed signals this is a one-time cut rather than the start of an easing cycle, or if Bitcoin fails to rally even with looser conditions, it may confirm what critics have long argued: crypto is just another speculative asset that only goes up when money is free and sentiment is frothy.
Hawkish cut
Scott Melker, host of The Wolf of All Streets podcast, says he expects the Fed to disappoint the bulls with what he calls a “hawkish rate cut,” coupled with language that dampens hopes for aggressive easing.
According to Melker, that means borrowing costs are cut by 0.25%, “but language about data dependency and lack of commitment to further cuts,” he said.
Now, there’s also the chance of a surprise 50 basis point cut.
If that happens, it could trigger “a significant rally in crypto since no one is truly expecting it,” according to Kyle Chasse, founder of venture capital firm MV Global.
Pedro Solimano is DL News’ Buenos Aires-based markets correspondent. Got at a tip? Email him at psolimano@dlnews.com.
