Fed Rate Cut Odds Just Doubled Overnight—Here's What It Means for Bitcoin

Bitcoin traders have adopted a more positive outlook following a sharp increase in expectations for a December interest rate cut by the US Federal Reserve. The probability of a rate reduction nearly doubled in 24 hours, reaching 69.40% on Friday from just 39.10% the previous day, according to the CME FedWatch Tool.

Target Rate Probabilities, Source: CME FedWatch Tool

The digital asset is currently trading around $85,083, reflecting a decline of more than 12.14% over the past week, according to CoinMarketCap data. Market participants believe a potential policy shift could provide support for Bitcoin after weeks of downward pressure.

Dovish Comments Trigger Market Response

The surge in rate cut expectations stemmed from remarks by New York Federal Reserve President John Williams. He indicated the central bank could reduce rates ”in the near term” without undermining inflation control efforts. Markets interpreted his statements as a dovish signal.

Bloomberg analyst Joe Weisenthal attributed the dramatic shift in odds primarily to Williams' comments. Social media discussions among cryptocurrency traders quickly turned optimistic. Crypto analyst Moritz questioned whether the increased probability would help Bitcoin establish a price floor.

Some market observers expressed strong bullish sentiment. Mister Crypto noted that such developments typically favor risk assets, though debate continues about the actual impact. Crypto commentator Jesse Eckel described the setup as extremely favorable, highlighting the economy's transition from monetary tightening to potential easing. Analyst Curb predicted that cryptocurrency markets could experience a significant rally.

Contrasting Views on Market Implications

Not all experts share the enthusiasm. Veteran economist Mohamed El-Erian cautioned against overreacting to a single speech. He warned traders might be extracting too much meaning from Williams' remarks.

Rate cuts generally drive investors toward assets like Bitcoin as traditional fixed-income yields decline. Several analysts argue that the macroeconomic environment now supports a potential reversal in cryptocurrency prices.

Coinbase Institutional released an analysis on Friday suggesting futures markets have underestimated the likelihood of a rate reduction. The firm stated: ”We believe the odds for a rate cut are actually mispriced.” Their assessment considered new tariff research, private-sector economic data, and real-time inflation monitoring.

According to Coinbase, traders initially anticipated a 25 basis point cut but revised expectations after inflation reports earlier this quarter raised concerns. The firm noted that tariff effects typically reduce inflation and increase unemployment in the short term. These factors create demand constraints that strengthen the argument for rate cuts.