TLDR
- Fed’s aggressive rate cuts could trigger substantial growth in Bitcoin and altcoins.
- Bitcoin surged briefly to $117K before the Fed’s rate cut announcement.
- CME data suggests a 91.9% chance of another Fed rate cut in October.
- Peterson expects market surprise from the Fed’s rapid rate cut strategy.
Bitcoin and other cryptocurrencies could be on the brink of a major price surge as the U.S. Federal Reserve makes further rate cuts. According to economist Timothy Peterson, the crypto market might be underestimating how quickly and aggressively the Fed could adjust its monetary policy. This shift, Peterson believes, will lead to a “jolt” for Bitcoin and altcoins, potentially driving their prices much higher in the coming months.
Rapid Rate Cuts Expected from the Federal Reserve
The Federal Reserve has already begun reducing interest rates for 2025, starting with a 25 basis point cut on September 17. The rate cut had been widely anticipated, with market analysts predicting such a move. CME data suggested a 96% chance of a quarter-point cut. Bitcoin briefly surged to $117,000 hours before the announcement but retreated to around $115,570 shortly after.
Markets are now pricing in a 91.9% likelihood of another 25 basis point cut during the Fed’s next meeting in late October. While the market has largely expected gradual cuts, Peterson warns that the situation could unfold more rapidly than anticipated. He suggests the “surprise effect” could cause a sharp reaction in the market, especially in the cryptocurrency space.
Bitcoin and Altcoins Could See Substantial Gains
According to Peterson, the Fed’s policy shift will likely trigger a strong upward movement in the prices of Bitcoin and altcoins. He predicts that the aggressive rate cuts will catch the market off guard and cause an increase in cryptocurrency prices within the next 3-9 months.
Peterson’s analysis is based on the idea that risk-on assets like cryptocurrencies tend to thrive when interest rates are lowered. With traditional investments like bonds and savings accounts yielding lower returns in a low-interest-rate environment, investors may shift their focus to assets like Bitcoin and altcoins, leading to price increases.
Mixed Expectations Around Future Fed Moves
Although the September rate cut was relatively mild, with some financial institutions like Goldman Sachs anticipating just a 25 basis point reduction, others, such as Standard Chartered, expected a more aggressive 50-point cut. The divergence of views highlights the uncertainty surrounding the Fed’s approach and suggests that further surprises may be in store.
Despite the market consensus around further cuts, Federal Reserve Chair Jerome Powell cautioned that the Fed is “not on a pre-set path,” signaling flexibility in its future decisions. This uncertainty, combined with the potential for faster-than-expected rate cuts, adds a layer of unpredictability to the situation, particularly for the cryptocurrency market.
Rate Cuts and Their Effect on Risk Assets
Lowering interest rates generally benefits risk assets, including cryptocurrencies. As the yield on traditional investments decreases, more capital tends to flow into riskier assets in search of higher returns. For Bitcoin and other altcoins, this could mean significant upward pressure on prices.
The anticipation of further rate cuts has already had a noticeable impact on Bitcoin, with its price briefly hitting new highs. As financial institutions and investors adjust to the shifting monetary environment, the likelihood of a major price surge for cryptocurrencies remains strong, according to Peterson’s forecast.
The full effects of the Fed’s actions on Bitcoin and altcoins remain to be seen, but many market participants expect the continued trend of lower rates to fuel further growth in the crypto market over the next several months.
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