The chances of a Fed rate cut just jumped. Here’s what it means for Bitcoin

1d ago•

DL News

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Investors are banking on the Federal Reserve cutting interest rates before the end of June.

The chances of a rate cut in June have surged from 51% to 60% since April 10 on crypto betting platform Polymarket.

Similarly, the CME FedWatch tool sets a 21% chance of a rate cut at the Fed’s May meeting, but those chances jump to 75% by June and over 90% by July.

For Bitcoin and other cryptocurrencies, a rate cut is usually a bullish signal.

“In general, high interest rates scare investors away from riskier investments like crypto, and the lowering of rates will be seen as a positive by the crypto investor community,” Dan Raju, CEO of Tradier, a brokerage platform, told Bankrate in March.

Wave of tariffs

The changing chances of the Fed slashing interest rates come after US President Donald Trump threw global markets into chaos by unleashing and then pulling back a wave of tariffs on about 100 countries around the world.

Bitcoin fell to $74,440 on April 7, but has since recovered to trade at just above $85,000. But if the US central bank cuts interest rates, that may trigger a new rally.

Fed pivot odds

The Bloomberg Financial Conditions Index tracks the overall level of financial stress in the US money, bond, and equity markets to help assess the availability and cost of credit.

The index is now tighter than it was during 2024 “Growth Scare,” when the Fed stepped in with a 50 basis point cut to avoid a broader meltdown, according to a note from crypto research firm Presto Labs

“This suggests the Fed is under pressure to act again,” Presto Labs analysts Peter Chung and Min Jung wrote.

Bitcoin outlook

Susan Collins, the head of the Federal Reserve Boston, has hinted that the central bank “would absolutely be prepared” to step in if needed.

Even so, she told the Financial Times that emergency rate cuts would not be the Fed’s tool of choice to tackle any deterioration in the market and boost liquidity.

Still, the prospect of the Fed stepping in, as it did during the pandemic by, among other things, launching unprecedented purchases of corporate debt, is a bullish sign for cryptocurrencies.

Arthur Hayes, the chief investment officer of Maelstrom and an angel investor, has been arguing for weeks that the Fed stepping in will trigger a crypto rally that will push Bitcoin to $250,000 before the end of the year.