Participants in the cryptocurrency markets may be underestimating just how aggressively the U.S. Federal Reserve will shift its monetary policy, according to a prominent economist. Timothy Peterson told Cointelegraph that the markets are not fully pricing in the likelihood of rapid rate cuts in the coming months, which could lead to significant market movements.
“Markets are underestimating how swiftly the Federal Reserve might reduce interest rates,” Peterson explained. “There has never been a gradual rate reduction like the one currently anticipated by the Fed. I believe we will see a surprise, which could catch investors off guard.”
“This surprise could cause Bitcoin and altcoins to surge substantially, likely within the next 3 to 9 months.”
The comments come shortly after the Fed’s decision on September 17 to cut interest rates by 25 basis points—the first such move in 2025. Market indicators, such as the CME FedWatch Tool, reflected a 96% probability of a quarter-point cut, with only a 4% chance of a larger 50-basis-point reduction prior to the announcement.
Market anticipates more rate cuts in October
Bitcoin (BTC) briefly spiked to around $117,000 just hours before the Fed’s decision but has since retraced, trading at approximately $115,570 at the time of publication, according to CoinMarketCap. Meanwhile, CME data suggests that traders are pricing in a 91.9% chance of another 25 basis point decrease at the upcoming October 29 rate-setting meeting, with only an 8.1% probability of rates remaining stable.
Comprehensive projections from Fed officials indicate that two more quarter-point cuts may be on the horizon this year. Despite this, Fed Chair Jerome Powell emphasized that the central bank “is not on a pre-set path,” signaling flexibility in future policy moves.
In September, some financial institutions were more aggressive in their expectations. For instance, Standard Chartered projected a 50 basis point cut, while Goldman Sachs CEO David Solomon expressed confidence that the Fed would opt for a more cautious 25 basis point reduction. Such rate changes typically favor risk-on assets like cryptocurrencies, as lower interest rates reduce yields on traditional investments such as bonds and savings accounts.
This environment underscores how ongoing monetary policy adjustments could influence the dynamic crypto markets, with potential for sharp bullish moves in Bitcoin and associated digital assets in the months ahead.
