According to economists, crypto market participants may be underestimating how aggressive the US Federal Reserve will be in changing policy direction over the coming months.
“The market is reducing the likelihood of rapid rate cuts in the Federal Reserve in the coming months,” economist Timothy Peterson told Cointelgraf on Friday.
“There hasn't been a gradual decline in the rates the Fed is currently expected,” Peterson explained that he expects a “surprise effect” to kick in and catch the market offside.
“It shakes Bitcoin and goes up a lot. And I think it'll happen in the next three or nine months.”
Peterson's comments come just days after the Fed held a 25 basis point, a highly anticipated event for the majority of the market, a 96% odds and a 4% chance of 50 bps, according to the CME Fedwatch tool.
The market expects another rate cut in October
According to CoinmarketCap, Bitcoin (BTC) surged to 117,000 hours a day a day before the Fed's cut announcement, but then retreated to the level seen the previous day, trading at $115,570 at publication.
Bitcoin has increased by 1.03% over the past 30 days. sauce: coinmarketcap
CME data shows that market participants price an additional 25 basis point rate reductions at the October 29 meeting, with only an 8.1% chance of the rate remaining changed.
Related: Bitcoin price is $110K target, as the expiration date of the $4.9T option arrives, so
Fed officials have stated two more quarter-point rate cuts this year. But Federal Reserve Chairman Jerome Powell said, “We haven't gone on the set path ahead of time.”
Financial institutions have been split in the next move by the Fed
Some financial institutions hoped for a more aggressive rate cut at their September meeting, with standard charter forecasts predicting a 50 basis point cut.
However, Goldman Sachs CEO David Solomon was sure the Fed would stick to a 25 basis point cut.
Rate cuts tend to be bullish for risk-on assets, including cryptocurrencies, as traditional investments such as bonds and term deposits are not advantageous for investors.
magazine: Meet the co-founders of Ethereum and Polkadot, who weren't Time Magazine
