The cryptocurrency market may be on the brink of significant gains as experts suggest that investors are not fully considering the U.S. Federal Reserve’s potential shift in monetary policy. Economist Timothy Peterson recently voiced his assessment, stating that the likelihood of rapid interest rate cuts could take market participants by surprise.
In an interview with Cointelegraph, Peterson explained, “Markets are underpricing the likelihood of rapid rate cuts in the coming months on the part of the Federal Reserve.” He noted that the current expectations for a gradual reduction of interest rates are unprecedented, highlighting that previous cycles have never depicted such a scenario.
Peterson anticipates that the “surprise effect” from these potential cuts will significantly impact the market, particularly Bitcoin and other altcoins. “It will jolt Bitcoin and alts up substantially, and I expect that will happen within the next 3 to 9 months,” he added.
These remarks follow the Federal Reserve’s recent decision to implement its first rate cut of 2025 on September 17, reducing rates by 25 basis points. This move aligned closely with market expectations, as the CME FedWatch Tool indicated a 96% probability of a quarter-point cut prior to the announcement.
In the lead-up to the rate cut, Bitcoin experienced a brief surge to $117,000, later settling back to $115,570 according to CoinMarketCap. Despite this fluctuation, Bitcoin has risen by 1.03% over the past 30 days. Market analysts are now anticipating another rate cut at the Fed’s upcoming meeting on October 29, with CME data indicating a 91.9% chance of an additional quarter-point reduction.
The Federal Reserve has indicated that they foresee two more quarter-point rate cuts by the end of the year. However, Fed Chair Jerome Powell cautioned that the board is not following a fixed trajectory, emphasizing a data-driven approach to monetary policy.
The financial sector appears divided regarding the Fed’s recent rate move, with some institutions expecting more aggressive cuts. Standard Chartered had predicted a more substantial reduction of 50 basis points, while Goldman Sachs CEO David Solomon expressed confidence that the Fed would opt for the smaller cut.
Lowering interest rates is generally viewed as a bullish sign for risk-taking assets, including cryptocurrencies, as traditional investments, such as bonds and savings accounts, offer decreased returns. This dynamic often prompts investors to seek alternative avenues for growth in the crypto market.
With the landscape evolving and the Fed’s monetary policy likely to influence market sentiment in the coming months, attentive investors may want to keep a close eye on developments within both the traditional finance sector and the cryptocurrency space.
As the potential for rate cuts looms, the market may find itself at a crucial juncture, with excitement in the crypto community rekindled by the prospect of upward price movements. Whether these predictions hold true will depend on the Federal Reserve’s actions and subsequent market responses.
