Bitcoin and the broader crypto market had a relatively stable weekend. Now, all eyes are on one key event: the U.S. Federal Reserve’s interest rate decision this Wednesday. Financial markets are waiting with bated breath. Will there be a major price move for bitcoin before the year ends, or is the potential rate cut already priced in?
High Probability of a Rate Cut: What’s the Impact on Crypto? #
The market’s primary scenario is a 25-basis-point interest rate cut. According to the CME FedWatch tool, the probability of such a move is currently 87%. However, the Fed is still awaiting a series of reports due this week, including new data on job vacancies and weekly unemployment claims, before making its decision. Figures indicating a weakening U.S. economy would increase the likelihood of a rate cut.
The crypto market is anxiously awaiting the Fed’s decision because interest rate cuts can have significant effects. Lower rates make saving less attractive and borrowing cheaper, encouraging investors to seek returns in riskier markets like crypto, leading to capital inflows. Historically, rate cuts have often led to price increases for cryptocurrencies. However, there’s a caveat: the Fed has already implemented two rate cuts this autumn, and their effects were largely muted.
The Fed Charts a New Course #
In addition to the rate decision, the central bank will also publish its latest economic outlook on Wednesday, which will indicate how many rate cuts investors can expect next year. Markets are already pricing in a much more aggressive path than the Fed has signaled so far, potentially towards a federal funds rate around 3% by 2026.
The Fed is also entering a transition period. Jerome Powell’s departure as chairman (by May 2026 at the latest) will bring in new leadership. Kevin Hassett appears to be the leading candidate, with about a 70% chance of becoming the next Fed chair. Hassett is a conservative economist who has worked for several prominent Republicans, including George W. Bush, John McCain, and Mitt Romney. He is known as a strong proponent of low interest rates. His potential appointment would further increase Trump’s influence over the Fed.
While low rates sound bullish for crypto, there are also fears of overly accommodative policy. If Hassett is too dovish, inflation could flare up again, and bond markets could react sharply, as they did in the 1970s. In that scenario, interest rates would rise, negating the benefit of lower policy rates.