Severe Likelihood of Federal Interest Rate Drops in September for Cryptocurrency Surge
With only two weeks to go until the next Federal Open Market Committee (FOMC) meeting, the crypto market is buzzing with anticipation. The probability for a Fed rate cut in September, as shown by the CME Watch Tool published by the CME Group, has risen to a staggering 97.6%.
For months now, US President Donald Trump has been vocal about his support for rate cuts, and historically, such moves have signaled a potential bull run for risk assets like Bitcoin and cryptocurrencies. The crypto market could rally off the news of a potential Fed rate cut, but it's essential to approach the situation with caution. High expectations often lead to dashed hopes, and the shift in sentiment occurred as the market entered September.
The rise in probability for a rate cut is due to a shift in market sentiment, with all focus remaining on the potential for Fed rate cuts, and no talks of a rate hike for months. On-chain data analytics platform Santiment reported that social conversations with the words "Fed", "rate", and "cut" have reached the highest level in almost a year.
However, periods of high social conversations about Fed rate cuts have often marked the top, leading to a potential "buy the rumor, sell the news" event. If the FOMC meeting's announcement differs from expectations, there is a possibility of prices crashing after a potential rally.
It would be wise to exercise caution around the FOMC meeting period due to the expectation of high volatility. The current probability for a rate hike in September is 0%. The crypto market's reaction to a Fed rate cut could be characterized by rapid price increases, increased volatility, and potential for a "buy the rumor, sell the news" event.
The Federal Reserve is expected to consider rate cuts in September, and the CME Watch Tool from the CME Group website shows a high probability for a Fed rate cut in September. Crypto investors are keeping a close eye on these developments, as rate cuts could significantly impact the crypto market.
