Participants in the crypto market might be underestimating the aggressiveness with which the US Federal Reserve will shift its policy in the upcoming months, according to an economist.
“Markets are mispricing the chances of quick rate cuts in the near future by the Federal Reserve,” economist Timothy Peterson told Cointelegraph on Friday.
“There has never been a slow decrease in rates like the one currently anticipated by the Fed,” Peterson explained, noting that he expects “the surprise effect” to emerge and possibly catch the market off-guard.
“It will significantly propel Bitcoin and altcoins upward, and I believe that will occur within the next 3-9 months.”
Peterson’s remarks follow the Fed’s recent implementation of its first rate cut of 2025 on September 17, lowering it by 25 basis points—an event that was highly anticipated by the market, with a 96% probability on that day, and a 4% chance of a 50 basis point reduction, according to the CME FedWatch Tool.
The market anticipates another rate cut in October
Bitcoin (BTC) briefly rose to $117,000 just hours before the Fed’s announcement of the rate cut but has since declined to levels observed in the previous days, trading at $115,570 at the time of publication, according to CoinMarketCap.
CME data indicates that market participants are expecting a 91.9% probability of another 25 basis point rate cut at the meeting on October 29, with just an 8.1% chance that rates will remain unchanged.
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Fed officials stated they expect two more quarter-point rate cuts this year. Nevertheless, Fed Chair Jerome Powell remarked, “We’re not on a predetermined path.”
Financial institutions divided on the Fed’s next actions
Some financial institutions had anticipated a more aggressive rate cut during the September meeting, with Standard Chartered predicting a 50 basis point reduction.
In contrast, Goldman Sachs CEO David Solomon was more assured that the Fed would opt for a 25 basis point cut.
Reducing interest rates typically benefits risk-on assets, including cryptocurrencies, as traditional investments like bonds and term deposits become less attractive to investors.
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