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Most Traders Still Believe in 4-5 Rate Cuts in 2024, As Crypto Awaits Fed Announcement
- Polymarket traders predict a 99% chance of a 25 basis-point Federal Reserve rate cut on September 18, reducing the rate to 5.00%-5.25%.
- The CME FedWatch tool suggests a 62% likelihood of a 50 basis-point cut, which could boost market liquidity and impact assets like Bitcoin.
- Not everyone agrees. Bitfinex indicates that a 50 bps cut could lead to a long-term correction in Bitcoin’s price.
Polymarket traders are nearly certain of a Federal Reserve interest rate cut at the upcoming meeting on September 18, with odds at 99% for a 25 basis-point reduction. This would bring the federal funds rate to 5.00%-5.25%.
Related: BlackRock Cautious on Fed Cuts Amid Inflation, Despite Rising Crypto ETF Investments
Bettors have placed over US$16M (AU$23.7M) on September 18 as the tentative date for an initial cut. Other markets within Polymarket are targeting the amount of points to decrease, with 50+ bps having a 60% chance on the platform.
The crypto community and market observers believe a more aggressive 50 basis-point cut is possible, with the CME FedWatch tool indicating a 62% chance for this larger reduction. Lower rates could boost market liquidity, leading to a surge in risk assets (like Bitcoin).
However, a Bitfinex report analysed the potential scenarios for BTC following rate cuts, stating that a smaller cut – 25 bps – would lead to a long-term price appreciation for BTC:
A 25 bps rate cut would likely mark the beginning of a standard rate-cutting cycle, which could lead to long-term price appreciation for BTC as recession fears ease. Such a move would signal the Fedʼs confidence in the economyʼs resilience, reducing the likelihood of a severe downturn. For BTC, this scenario could initiate a gradual uptrend after a sell-the-news event as the market anticipates more liquidity entering the system.
Bitfinex On the other hand, a significant rate of 50 bps cut could trigger recession concerns and lead to a substantial correction in BTC’s price:
A significant cut might increase recession concerns, leading to a temporary peak in the BTC price followed by a more substantial correction. This would mirror past instances where aggressive rate cuts initially boosted asset prices, only for the gains to be tempered by rising economic uncertainties.
Bitfinex And the Winner Is, Polymarket
Nearly one US$1B (AU$1.48B) in bets is what Polymarket has accumulated for the winner of the United States 2024 presidential election.
What’s more, it seems that bettors brushed off the recent assassination attempt on Trump because it barely moved his chances of winning on Polymarket, which is the opposite of what happened after his first assassination attempt in Pennsylvania in mid-July.
Related: Bitcoin Mining Difficulty Reaches New All-time High, Will Price Follow?
The incident did not improve his standing on the betting platform, where Trump’s odds against Democratic nominee Kamala Harris actually decreased following the event.
Author
José Oramas
José is a journalist and translator with a keen interest in blockchain and cryptocurrencies.
