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Bitcoiners enthusiastic: chance of rate cut in December shoots up #
The crypto market looked remarkably more positive towards the price of bitcoin on Friday, after the chance of a rate cut by the U.S. Federal Reserve almost doubled in one day. The sudden shift in expectations, coming from the CME FedWatch Tool, fueled speculation that the recent decline of the largest cryptocurrency may have reached its provisional bottom.
Optimism due to sharp jump in rate expectations #
According to CME data, the probability of a rate cut during the Federal Open Market Committee (FOMC) December meeting rose to 69.4% on Friday. A day earlier, that was only 39.1%. This means a jump of over thirty percentage points within 24 hours.
Market observers linked this to recent reassuring comments from John Williams, president of the New York Fed, who indicated that the central bank sees room to cut rates in the near future without jeopardizing the inflation target.
Possible end to the decline? #
Bloomberg analysts stated that his comments caused the turning point.
On social media, analysts in the crypto sector eagerly embraced this. Traders hope that the changing macro expectations will put an end to the downward trend. Crypto analyst Moritz wrote: “Let’s see if this is enough to find a bottom for now.”
Crypto analysts see opportunities for a major rally #
Within the sector, there is a conviction that a rate cut traditionally has a positive effect on riskier assets, including crypto. When fixed-income products become less attractive, capital often shifts towards markets with higher volatility and growth potential. According to analyst Jesse Eckel, the current market setup even looks “unfathomably bullish” now that the cycle seems to be turning from tightening to easing.
Institutional parties are also joining the debate: according to Coinbase Institutional, the current expectations for December are misjudged. They point to recent studies showing that higher import tariffs can temporarily depress inflation and weaken the labor market, factors that could actually point towards a rate cut.
Weak market sentiment remains a factor #
Despite the revival in macro optimism, the overall crypto sentiment remains low. The Crypto Fear & Greed Index recorded a score of 14 on Friday, indicating ‘Extreme Fear’. Traders hope that the sharply risen rate expectations are enough to turn that sentiment around, but for now the market remains clearly cautious.