Crypto Markets Brace: September Rate Cut Hopes Dim Despite Powell’s Reassurances

Jerome Powell's latest speech failed to move the needle—traders now see less than a 40% chance of September cuts.

Market Realities Bite

The Fed chair's measured tone did little to shake crypto from its rate-sensitive anxiety. Bitcoin barely budged, holding near recent lows as traditional finance clings to inflation fears.

Crypto's Rate Paradox

Digital assets keep wrestling with macro pressures. Lower rates typically boost risk appetite, but the Fed's stubborn stance keeps leverage in check. Meanwhile, decentralized finance protocols quietly bypass traditional rate mechanisms altogether.

Wall Street's 'Wait-and-See'

Institutional flows stagnate as hedge funds await clearer signals. Another reminder that crypto volatility often hinges on the oldest finance game: guessing what the Fed will do next.

Probability Of Rate Cuts Drops From 92% To 75%

Earlier in the month of August, Bitcoinist had reported that the CME Group’s FedWatch tool was showing a high 92% probability of rate cuts happening in the month of September. This had come after there were no rate cuts in July, turning all eyes on the next September 17 date, with only a 7.8% probability that the Fed will keep rates the same and 0% probability of a rate increase.

However, as the month of September draws closer, the probability of a rate cut looks to be on the decline. According to the FedWatch website, there is now a 75% probability that the Federal Reserve will institute rate cuts on September 17. This marks a major difference in the numbers from earlier in the month, suggesting that market developments have triggered a much more conservative outlook.

The drop in the expectation of a rate cut has now moved into the more conservative territory of rates being kept the same. The tool shows that there is now a 25% probability that the Fed will choose to maintain rates as it did back in July. Interestingly, the probability of an interest rate hike in the month of September is still at 0%, showing no chance of this happening.

Why Rise In Optimism Could Affect Crypto

Despite the drop in the probability, Optimism around a possible Fed rate cut is still high, as shown by data from Santiment. A report from the platform pointed out that social mentions of words like “fed”, “rate”, and “cut” have all hit a new all-time high. The report translates this as euphoria being very high, and for the crypto market, this could mean that it is headed for a top.

Another thing that points toward a possible crypto top is the fact that Bitcoin balances on exchanges are on the rise once more. Usually, when investors send cryptocurrencies to exchanges, it means they are looking to sell, and such profit-taking could signal a top. As such, investors could benefit from taking a cautious stance as the market decides on a direction ahead of the FOMC meeting in September.