Expectations surrounding the possible rate cuts by the Federal Reserve in September are approaching peak levels, particularly among crypto investors. Historically, Fed rate reductions have often meant the start of a Bull Run as it informs investors that they will acquire more positions in risky assets such as Bitcoin and crypto. So with just two weeks left in the next FOMC meeting, votes have already come in on what the Fed will do and how the crypto market will respond.
The probability increases by more than 97%
The CME Watch tool on the CME Group website shows the highest odds ever for Fed rate reductions in September. The percentage fluctuated in August, rising above 92%, and again returned to 75% as various developments emerged. However, as the market enters September, sentiment has been completely skewed positively, and odds have risen dramatically.
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Bitconist reported that the probability had dropped to 75% until the end of August. But now, this number has returned again, reaching its highest level so far ahead of the FOMC announcement. The Fed Watch Tool reads a 97.6% chance that the Fed will cut its fees this September and trigger another bull run.
This number means there is only a 2.4% chance that the Fed would choose to keep it at the same level as last time. In contrast, there is still a 0% chance that a rate hike will take place this September. In fact, there has been no talk of Fed rate hikes for months now.
How the crypto market responds
Naturally, Fed rate reductions are bullish for both the stock and crypto markets as they allow investors to take on more risks. This will cause liquidity flows to market, rapidly increasing prices and at the same time increasing market volatility.
There is hope that the crypto market could close the news, especially as US President Donald Trump has supported interest rate cuts for months. However, since hope is often destroyed, you also need to be cautious due to high expectations.
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In the report, Santiment, an on-chain data analytics platform, revealed that social conversations with the words “Fed”, “rate” and “cut” have risen to the highest levels in almost a year. This suggests a lot of bullishness surrounding the FOMC meeting. However, these periods often reached the top, leading to the possibility of “buying rumors and selling news” events.
If the latter is true, it means that the price will rise to the FOMC meeting and could crash if the announcement is different from expectations. Therefore, it would be wise to be cautious about this period, especially with the hope of high volatility.
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