Fed Rate Cut Probability Drops, Impacting Crypto Markets

Overnight Index Swap data indicates that the probability of a December rate cut by the Federal Reserve has dropped to approximately 50%, impacting both traditional and cryptocurrency markets.

This change signals potential macroeconomic shifts, notably affecting major cryptocurrencies, sparking volatility, and triggering significant market liquidations amid cautious investor sentiment.

Fed Policy Shift Shakes Bitcoin and Ethereum Prices

The recent data from the Overnight Index Swap market indicates a significant shift in the anticipated U.S. Federal Reserve’s approach to interest rates. This shift follows hawkish statements by Fed Chair Jerome Powell, emphasizing a cautious, data-dependent stance on rate adjustments.

Immediate market implications include a decline in Bitcoin and Ethereum prices, which fell below $110,000 and $3,900, respectively. Total market liquidations reached $1.134 billion, signifying a major repricing as traders adjusted their expectations of a rate cut. According to Jerome Powell, Chair, U.S. Federal Reserve, “Recent readings on both job gains and inflation have come in higher than expected. We remain highly attentive to inflation risks,” reflecting the hawkish stance affecting OIS pricing.

Market reactions have been swift, as evident from recent liquidations and price drops. Despite no direct statements from key crypto figures, the cautious tone from Powell has significantly impacted market sentiment, with trading on leading perpetual DEXs like Aster, Lighter, and Hyperliquid reflecting these changes.

Crypto Markets Under Pressure: $1.134 Billion Liquidated

Did you know? Previous Fed policy uncertainties in 2022 and 2023 sparked considerable volatility in Bitcoin and Ethereum, similar to the current climate affecting the crypto market’s reaction to changing rate expectations.

Bitcoin (BTC) is currently priced at $110,578.08, with a market cap of $2.21 trillion, capturing 59.42% market dominance, according to CoinMarketCap. Over the past 90 days, Bitcoin experienced a -2.26% price change, with recent day fluctuations reflecting ongoing macroeconomic influences.

According to the Coincu research team, the reduced probability of a December Fed rate cut holds potential for heightened volatility and market adjustments. Trading activity is likely to remain high as investors continue to reassess their positions amidst evolving monetary policy cues.