The U.S. Federal Reserve may be preparing to ease monetary policy far more aggressively than traders currently anticipate, according to economist Timothy Peterson.
He cautioned that markets are “underpricing” the likelihood of sharp cuts in the coming months, which could act as a powerful catalyst for digital assets.
Peterson argued that investors have grown too comfortable with the Fed’s carefully managed messaging. “There has never been a gradual reduction in rates like that currently envisioned,” he said, adding that if the central bank pivots more abruptly, the shock could send Bitcoin and altcoins soaring within the next three to nine months.
The warning comes shortly after the Fed reduced its benchmark rate for the first time in 2025, trimming by 25 basis points on September 17. Markets largely expected the move, with CME’s FedWatch Tool showing a 96% probability of that exact cut ahead of the announcement.
Bitcoin initially spiked above $117,000 in the hours before the decision, but momentum quickly faded, with the coin hovering around $115,570 at the time of writing. Over the past 30 days, Bitcoin has managed a modest gain of just over 1%, according to CoinMarketCap data.
Looking ahead, traders are betting heavily on another 25 basis point cut at the Fed’s October 29 meeting, with futures data implying a more than 90% chance of such a move. Only a small minority expect policymakers to hold steady. Officials have indicated that at least two more cuts are possible this year, though Fed Chair Jerome Powell has stressed that decisions will remain data-dependent.
Not all institutions saw eye to eye on the September cut. Standard Chartered forecasted a half-point reduction, while Goldman Sachs signaled confidence in the more measured 25-point move that ultimately took place.
Lower borrowing costs are generally seen as bullish for risk assets, since safer alternatives like government bonds or term deposits offer diminishing returns. If Peterson’s projection of faster and steeper cuts proves accurate, the crypto market could be positioned for a sharp rally as liquidity returns to the system.
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Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
Source: https://coindoo.com/economist-predicts-surprise-fed-cuts-could-ignite-bitcoin-rally/