Expectations for the U.S. Federal Reserve’s upcoming interest rate decision are intensifying, with markets increasingly pricing in the possibility of a larger-than-expected rate cut.
This has put Bitcoin within striking distance of its all-time high, as traders and analysts monitor both traditional and bitcoin-specific indicators for signs of a breakout.
Market anticipates September Fed decision
Markets are currently assigning a roughly 17% probability to a 50 basis point cut at the September 17 FOMC meeting, with the majority still expecting a 25 basis point move.
According to CME Group’s FedWatch tool, implied probabilities as of September 10 show 90% odds for a 25bps cut and 10% for 50bps.
On Polymarket, a $21 million contract reflects similar sentiment, splitting bets at 81% for 25bps and 17% for 50bps.
A recent Bureau of Labor Statistics revision showed the U.S. created about 911,000 fewer jobs through March 2025 than previously reported, the largest such downward adjustment since 2009.
Inflation remains mixed, with core CPI at 3.1% year-over-year in August and core PCE at 2.9% in July.
Bitcoin’s reaction to policy shifts
A 25bps cut remains the base case and would likely result in a modest boost for risk assets, with equities and bitcoin expected to see gains of 1-3%.
However, a 50bps ‘insurance’ cut—recently advocated by some banks following weak labor data—could provide a stronger impulse for bitcoin, potentially driving a 2-5% rally.
Conversely, a hawkish hold could pressure risk assets, sending bitcoin lower.
Bitcoin’s price remains sensitive to U.S. dollar moves and real yields.
The cryptocurrency recently touched a record high near $124,000 in mid-August amid speculation of easier monetary policy.
Cross-asset context and outlook
Gold prices have set records this week as well, reflecting broader demand for alternative assets ahead of the Fed meeting.
The U.S. Treasury yield curve is expected to steepen into year-end, with the two-year yield projected to fall faster than the ten-year.
Upcoming data releases on inflation and retail sales could further tilt expectations for the size of the Fed’s move and its impact on bitcoin.
Ultimately, the path of interest rates, labor market updates, and inflation gauges will determine whether the Fed opts for a cautious trim or a more significant recalibration, with Bitcoin poised for volatility around the decision.
