Participants in the crypto market may be misjudging the US Federal Reserve’s aggressive approach to policy changes in the upcoming months, as noted by an economist.
“The markets are not accurately pricing in the chances of swift rate cuts from the Federal Reserve in the near future,” said Economist Timothy Peterson in an interview with Cointelegraph on Friday.
“The Fed has never previously enacted a gradual rate reduction as currently projected,” Peterson remarked, suggesting that “the surprise factor” could potentially catch the market off guard.
“This will significantly boost Bitcoin and altcoins, likely within the next 3-9 months.”
Peterson’s remarks follow the Fed’s first rate cut of 2025 on Sept. 17, which was reduced by 25 basis points—a measure widely anticipated by the market, with a 96% likelihood on the day, and a mere 4% chance of a 50 bps cut, according to the CME FedWatch Tool.
The market is expecting another rate cut in October
Bitcoin (BTC) briefly hit $117,000 just hours before the Fed’s rate cut announcement but has since dipped back to previous levels, trading at $115,570 at the time of this publication, according to CoinMarketCap.
CME data indicates that market participants foresee a 91.9% likelihood of an additional 25 basis point cut at the Oct. 29 meeting, leaving an 8.1% chance that rates will stay the same.
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Fed officials mentioned two more quarter-point rate cuts for this year. However, Fed Chair Jerome Powell stated, “We’re not on a defined path.”
Divergence in financial institutions on Fed’s next decision
Some financial institutions anticipated a more drastic rate cut during the September meeting, with Standard Chartered forecasting a 50 basis point drop.
Conversely, Goldman Sachs CEO David Solomon expressed confidence that the Fed would adhere to a 25 basis point reduction.
Lowering interest rates often benefits risk-on assets, including cryptocurrencies, as conventional investments like bonds and term deposits lose their appeal to investors.
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