TL;DR
- The market is discounting with 100% probability a FED rate cut in its next meeting.
- The only doubt keeping Wall Street in suspense is the magnitude of the cut: 25 or 50 basis points.
- A looser monetary policy makes money cheaper and encourages investment in risk assets like Bitcoin.
With less than two weeks to go until the Federal Reserve’s(FED) Federal Open Market Committee (FOMC) meets, the discussion on Wall Street seems to have concluded; in fact, it feels like the chronicle of a foretold decision. Traders and institutional investors have delivered their verdict: the probability of a new interest rate cut stands at a categorical 100%.
The question is no longer if the FED will act; the tension now rests on the magnitude of its action. Markets remain in suspense, wondering if Jerome Powell and his committee will opt for a moderate 25 basis point cut to calm the waters, or if they will send a much stronger signal with an aggressive 50 basis point move, indicating they are ready to stimulate the economy at all costs. This decision will define the global economic narrative for the end of the year.
Why does a FED cut boost Bitcoin?
The answer lies in liquidity and risk appetite. A more “dovish” or soft monetary policy from the US central bank means the cost of money decreases. When interest rates fall, savings instruments considered “safe,” like treasury bonds, lose their appeal by offering lower yields.
This phenomenon pushes institutional and retail investors to seek higher returns elsewhere, causing a capital rotation towards so-called “risk assets.” In the digital age, Bitcoin ($BTC) and the crypto ecosystem are the main examples of this category.
Historically, the correlation between a low-rate environment and the performance of cryptocurrencies has been notably positive. The liquidity injected into the system looks for a home, and Bitcoin, with its decentralized nature, programmed scarcity, and potential for appreciation, becomes a magnet for that capital. The impending Fed Rate Cut and Bitcoin are thus intrinsically linked; it’s not just good news, it’s the fuel the market was waiting for.
With the FED’s decision just around the corner, this move is perceived by many analysts as the definitive catalyst that could light the fuse for the next major bull run. The macroeconomic stage is about to align its tailwinds in favor of digital assets.
