- The prime crypto asset, Bitcoin, surged from $87K to $91k in the last 24 hours heading into Monday.
- Anticipation of an interest rate cut at this week’s FOMC meeting feeds bullish narratives in crypto.
Bitcoin (BTC) is showing a significant recovery despite the broader crypto market experiencing nearly half a billion dollars in liquidations from leveraged positions in the last 24 hours. Reinforcing the uptick in trader and investor sentiment is the anticipation of the US Federal Reserve interest rate cut this week.
Crypto Sentiment in ‘Extreme Fear’
Crypto trader and investor sentiment has remained at an “Extreme Fear” level since the weekend, with the Crypto Fear & Greed scale stagnating at 20 out of 100. This means investors are too worried, which could lead them to exit their digital asset positions.
On the other hand, the trend presents a buying opportunity for people with high risk tolerance, as the lower prices offer them a cheaper entry point into various crypto assets, such as Bitcoin. This could be one of the factors contributing to BTC’s recovery this Monday from $87K to $91K in the 24-hour chart.
Very High Probability of a December Interest Rate Cut
The most significant driver in the renewed market optimism, however, is the upcoming Federal Open Market Committee (FOMC) meeting from Tuesday to Wednesday. Analysts and the crypto community expect the event to trigger another 25-basis-point interest rate cut.
The market pulse is a complete turnaround from the public’s bleak outlook a few weeks ago, fueled by a Morgan Stanley report. The banking giant notably dismissed the possibility of a year-end interest rate cut, citing resilient jobs data and inflation moving further from the US central bank’s 2% target for a soft landing.
The CME Fedwatch, based on trends implied by 30-day Fed Funds futures prices, indicates an 87.2% chance that the US central bank will continue its streak of interest rate cuts this month. In this case, the figures will likely drop to 3.5%-3.75% after September’s 4%-4.25% and October’s 3.75%-4% rates. It only suggests 12.8% odds that the institution will keep the status quo.
Meanwhile, decentralized prediction market Polymarket shows a 94% probability of a Fed interest rate cut. The rest accounted for the likelihood that the central bank would maintain the current rates.
The Odds Inside the Fed
So far, two Fed governors, Christopher Waller and Stephen Miran, have been vocal in their support for lower interest rates. The latter, who voted for a 50 bps slash at the late-October FOMC meeting, even proposed larger cuts than the suggested 25 bps for December.
In contrast, Fed Bank of Boston President Susan Collins is hesitant to vote for an interest rate reduction, as she believes that the combined 50 bps cuts in September and October were already in the “mildly restrictive range.” She stated that the above-target inflation and softening jobs market do not warrant a rate adjustment.
Fed Chair Jerome Powell has been neutral in his comments to the press, but analysts forecast a dovish stance from the official this time.
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