Cryptocurrency investors might be underestimating the potential shifts in monetary policy by the US Federal Reserve, according to insights from economist Timothy Peterson. Speaking to Cointelegraph, Peterson highlighted that the market is currently not pricing in the likelihood of faster-than-expected rate cuts in the upcoming months.
“Markets are underpricing the likelihood of rapid rate cuts in the coming months on the part of the Federal Reserve,” Peterson stated. He noted that the current expectations do not align with historical patterns, as “there has never been a gradual reduction in rates like that currently envisioned by the Fed.” He anticipates a potentially strong market reaction where Bitcoin and other altcoins could see significant upwards movement, suggesting this could happen within the next three to nine months.
Peterson’s analysis follows the recent decision by the Federal Reserve to implement its first rate cut of 2025 on September 17, lowering rates by 25 basis points. This move was largely anticipated, with the CME FedWatch Tool indicating a 96% probability for a quarter-point cut prior to the announcement, while a more aggressive 50-point cut had only a 4% chance.
Since the announcement, Bitcoin experienced a fleeting spike to around $117,000 but has since retreated to approximately $115,570 at the time of writing, according to CoinMarketCap. Over the past month, Bitcoin has seen a slight growth of 1.03%.
The cryptocurrency market is already bracing for another rate cut, with 91.9% of market participants predicting a further 25 basis point reduction in the Federal Reserve’s meeting on October 29. Only an 8.1% chance is perceived for the rates to remain unchanged. Fed officials have signaled that they may implement two additional quarter-point rate cuts this year, although Fed Chair Jerome Powell emphasized that “we’re not on a pre-set path.”
The financial community appears divided on the recent rate cut decision. While some institutions, such as Standard Chartered, had projected a more aggressive approach with expectations of a 50 basis point reduction, others, including Goldman Sachs’ CEO David Solomon, expressed confidence in the maintained 25 basis point cut.
Traditionally, lowering interest rates is seen as a bullish signal for riskier assets, such as cryptocurrencies. As returns from traditional investments, including bonds and savings accounts, decline, investors often look toward cryptocurrencies and equities for greater returns. This shift in capital could further bolster Bitcoin and altcoin valuations as the market adjusts to the new monetary environment.
As the crypto community navigates the implications of Federal Reserve actions, many will be watching closely to see how these developments might shape price movements in the coming months.
