Bitcoin Steady Above $58k Amid Rising Odds of Fed's 50bps Rate Cut

By: Isha Das

The probability of a 50 basis point rate cut by the Federal Reserve during its upcoming meeting on September 18 has surged dramatically from 14% to 41%, according to recent market data. This shift is happening alongside significant gains in the stock market over the last couple of days and stable futures markets overnight, suggesting minimal stress signals from equities.

According to analysts, the change in the rate cut expectations can be partially attributed to a Wall Street Journal article by Nick Timiraos, which some interpret as a signal from the Federal Reserve. Jim Bianco of Bianco Research noted how the market reacted sharply following the article's publication, causing the odds of a larger rate cut to rise quickly.

Spencer Hakimian, Founder of Tolou Capital Management, observed that an after-hours bet on a 50 basis point cut caused market-implied odds to jump from 15% to 36% almost instantly. This sudden change has led to increased speculation among investors regarding the Federal Reserve's potential direction on monetary policy.

Gold prices have rallied from $2,512 to $2,568, potentially indicating market concerns about whether a 50 basis point cut is appropriate. Bitcoin also rose earlier from $55,700 to $58,000 before stabilizing, although its movement occurred 24 hours prior to these events. Bitcoin's price now nears $60,000 as traders anticipate the rate cut.

Despite the higher likelihood of a significant rate cut, the stock markets are not showing signs of stress. This lack of volatility has left some analysts puzzled, as traditional indicators do not suggest an urgent need for aggressive monetary easing. Hakimian responded to Bianco's observations, saying,

“I am unsure myself. I was camp 25 due to the pricing. But now I am unsure.”