Polymarket traders see a 99% chance of rate cuts this week

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Polymarket traders are mostly betting on a Federal Reserve rate cut this week, with 99% odds on a cut at the next meeting on September 18, 2024. Traders anticipate a 25 basis point cut, which would lower the federal funds rate to a range of 5.00% to 5.25%.

While some economists are speculating a more aggressive cut of 50 basis points, the general consensus anticipates two cuts this year, targeting a year-end target of 4.75%-5.00%.

According to the CME FedWatch tool, the probability of a 50 basis point cut has increased to 65%, up from the previous 35% probability of a 25 basis point cut.

This change in interest rates is expected to have a significant impact on risk assets like Bitcoin. Lower rates typically increase market liquidity, pushing investors toward higher-yielding, riskier assets. Analysts predict a rise in Bitcoin prices as a result, although this could also introduce short-term volatility to the market.

A Bitfinex analyst predicts a 15-20% drop in Bitcoin prices following the rate cut, with a potential low between $40,000 and $50,000. This forecast is based on historical data showing a decline in cycle peak returns and a reduction in average bull market corrections. However, these forecasts could be affected by changing macroeconomic conditions.

The last time the Fed implemented a rate cut was in March 2020 in response to the COVID-19 pandemic, marking only the second rate cut in Bitcoin history.

Earlier this week, one economist predicted that the Federal Reserve’s anticipated 25 basis point rate cut could trigger a “news sell” event that affects risk assets.

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