Bitcoin Stumbles as Polymarket Signals Dwindling Fed Rate Cut Hopes – What’s Next for Crypto?

Bitcoin's rally hits a snag as traders slash bets on Federal Reserve easing—just when crypto bulls thought macro winds were shifting.

Polymarket's prediction odds nosedive, dragging BTC below key levels. The crowd-sourced platform now prices in a grim reality: sticky inflation might keep rates higher for longer.

Remember when Wall Street swore 2025 would bring six cuts? So much for that crystal ball.

Volatility alert: With the Fed put evaporating, crypto's correlation to traditional finance just got more dangerous. Buckle up.

Bitcoin pressured by falling Fed cut odds

BTC price jumped to a record high of $124,420 on Aug. 14 after the Bureau of Labor Statistics published an encouraging consumer inflation report. While the Core Consumer Price Index rose to 3.1%, the headline figure remained unchanged at 2.7%.

The sentiment changed a day later after the producer price index data soared to 3.6% in July. This report led to jitters about whether the Fed WOULD cut interest rates in September, as many analysts had expected. 

These jitters emerged on Friday when the U.S. released its latest inflation expectation report. A survey by the University of Michigan showed that inflation expectations for 2026 jumped to 4.9% and 3.9% for the next five to ten years. 

These numbers, together with the weak nonfarm payrolls report earlier this month, suggests that the US is heading towards stagflation, which is characterized by high inflation and slow economic growth.

Today's University of Michigan (UMich) consumer sentiment data fell short of consensus forecasts in a stagflationary direction. Specifically, the consumer confidence index declined from 61.7 in July to 58.6 this month (with current conditions at 60.9 and expectations at 57.2).…

Therefore, Bitcoin price pulled back as traders pared back their Federal Reserve interest rate cut odds. Polymarket data shows that the odds of a September cut, while still high, have declined from 80% to 70% as of today. 

Historically, BTC price does well when the Federal Reserve is cutting interest rates or when the cut expectations are rising. 

Bitcoin price also pulled back after Austan Goolsbee, an FOMC member, warned that the bank needed more data to determine the next course of action because the impact of new tariffs would take time. 

BTC price technical analysis

The daily timeframe chart shows that bitcoin price has come under pressure in the past few days. This pressure began to form as a highly bearish double-top pattern at $123,200, with a neckline at $112,000. 

Bitcoin has also formed a bearish divergence pattern, as evidenced by the Relative Strength Index and the MACD indicators, which have formed lower lows and lower highs. 

Therefore, BTC price will likely pull back in the next few days and then resume the uptrend. More gains will be confirmed if it rises above the all-time high of $124,420.