The ongoing Federal funds rate setting conference call due for September 17-18 will therefore be a crucial meeting for the financial markets. There are high expectations for the Fed to reduce interest rates and this could have a significant market impact, with far-reaching effects towards bitcoins and other forms of virtual money.
What the Data Shows
The upcoming Fed meeting is set to favour a rate cut, making it a focal point for financial markets. CME FedWatch information shows that there is a 59% probability of a 50 bps cut and a 41% probability of a 25 bps slash. Polymarket data shows a 55% chance of a 50 bps cut and a 43% chance of a 25 bps cut. These odds shifted after the recent Producer Price Index (PPI) showed economic improvement.
This rate cut would be the first since the Fed started its current cut cycle in March 2020. The last cut was crucial, sparking the 2021 bull run that saw Bitcoin surge to nearly $68,500.
Fed Meeting’s Effect on Bitcoin and Crypto Markets
The market impact could be substantial. Crypto analyst Doctor Profit can give a more or less rosy forecast. If the Fed cuts rates, Bitcoin might face some short-term pressure. This positive shift results from effective global management of the H1N1 flu, the evolving situation between Israel and Lebanon, and other key global events. Doctor Profit advises traders to stay cautious, as the market will likely see increased volatility in the short term.
Nevertheless, Doctor Profit appears to be optimistic about Bitcoin’s future prospects. Based on Salerno’s opinion, new rounds of Quantitative Easing (QE) will increase the amount of liquidity in the crypto market. The market impact of FTX creditors’ willingness to repay and accept more USDT in Q4 could boost market liquidity.
What’s on Horizon?
Looking ahead, analysts from Citi and other institutions predict further rate cuts beyond September. They foresee a total reduction of up to 1.25% by the end of the year. This suggests that the Fed’s decisions will likely continue to influence market conditions and have a significant market impact in the months to come.
As the Fed meeting approaches, the financial world is closely watching how these changes will impact traditional and crypto markets with a considerable market impact.
Also Read:
FTX Crisis: Sam Bankman-Fried’s Fight for Retrial and Crypto Regulation
US Fed Rate Cut Could Trigger 20% Drop in Bitcoin, Say Analysts
Discussion about this post