Expert Sees 80% Chance Of September Rate Cut—What It Means For Crypto

The Bitcoin and the crypto market witnessed significant volatility on Friday, August 22, rallying hard on the back of the Federal Reserve Chair Jerome Powell’s speech at Jackson Hole. Powell suggested a possible shift in the US policy direction, hinting that the interest rates could soon be cut.

This speech triggered volatility in the risk assets and the crypto market, with most large-cap cryptocurrencies jumping to new local highs. The price of Ethereum, for instance, briefly ran up to a new all-time high around $4,888 on Friday. 

Now, optimism seems to be on the rise about the outcome of the Federal Open Market Committee (FOMC) meeting in September and its potential impact on Bitcoin and other risk assets.

September Rate Cut Might Be A Done Deal: Expert

In a recent post on the X platform, investment research expert Jim Bianco shared insights from Powell’s speech at Jackson Hole on Friday. According to the online pundit, the Fed chair’s speech was open to several interpretations, especially as seen with varying professional opinions since then.

Bianco stated that Powell didn’t exactly specify what he plans to do in the coming month, making his Jackson Hole speech a “Rorschach test.” For context, the Rorschach test is a projective test that employs ambiguous stimuli (typically inkblots) to evoke a person’s internal attitude and biases.

Bianco highlighted that the probability of a September rate cut was approximately 80% at the start of the week. However, this narrative—a week ago—hinged on a strong August payroll and the hot August CPI (Consumer Price Index) moving higher than July’s 3.1%. Both data are expected to be released before the FOMC meeting on September 18 and are expected to determine whether or not the Fed will cut interest rates.

Following Powell’s speech at Jackson Hole and at the end of Friday, the probability of the rate cuts returned at roughly 80%—essentially back to the past week’s narrative. Ultimately, Bianco believes that the situation of the September rate cut never changed and is still dependent on economic data in early September.

Source: @biancoresearch on X

Bianco concluded: 

To paraphrase Miracle Max in The Princess Bride, a September rate cut is mostly a done deal, but that means it’s also slightly not a done deal.

What This Means For Bitcoin And Crypto Market?

Lower interest rates typically make risk assets, like cryptocurrencies and equities, more attractive investment options, as the potential yield on fixed-income assets (like treasury bonds) falls. Historically—and as seen on Friday, Bitcoin and the crypto market tend to surge whenever the Fed cuts interest rates.

Hence, a September rate cut by the US Federal Reserve could be generally bullish for Bitcoin and crypto, as investors might rush to these risk assets for higher gains. As of this writing, the entire cryptocurrency market is valued at about $4.07 trillion.

The price of Bitcoin on the daily timeframe | Source: BTCUSDT chart from TradingView

Featured image from iStock, chart from TradingView