Federal Reserve December Rate Cut Probability Declines

The probability of a Federal Reserve interest rate cut in December has fallen below 50%. This is a significant change from prior expectations, which were approaching near-100%.

Key players include the Federal Reserve led by Jerome Powell. The Fed’s decisions have a profound impact on macroeconomic sentiment and risk-on assets like cryptocurrencies. James Butterfill, Head of Research, CoinShares, stated, “We expect 25 basis points in October and a further 50 basis points in December.”

Bitcoin’s price corrected significantly, reflecting its vulnerability to macroeconomic changes. No notable immediate reaction in funding rounds or grants occurred due to the rate cut probability shift.

Historical data suggest that rate cuts typically spur a rally in cryptocurrencies. However, uncertainty or reduced probability tends to cap potential gains and heighten short-term volatility.

Past rate cuts have generally led to rallies in risk-on assets. When there is uncertainty, such assets often experience increased volatility, as demonstrated by recent Bitcoin movements.

Experts like Thomas Perfumo from Kraken highlight the macro backdrop as crucial for the current crypto cycle. Thomas Perfumo, Global Economist, Kraken, noted, “The macro backdrop is the dominant driver of this crypto cycle.”