Markets Lower Their Expectations for a Fed Rate Cut
At the start of November, many investors still believed the Federal Reserve would cut interest rates in December. But within a few days, that expectation changed. The probability of a rate cut has now fallen below 50%, creating uncertainty across the markets — including crypto.
Key Points:
- Previously, 67% of investors expected a 25-basis-point rate cut in December.
Now, that probability has dropped to 45.9%.
- This shift is driven by weaker market sentiment and the Fed’s more cautious view of the economy.
- Fed Chair Jerome Powell warned in October:
“An additional rate cut in December is not guaranteed. Monetary policy is not on a predetermined path.”
This statement reinforces the idea that the Fed may keep interest rates high for longer, especially if economic data remains strong. Major investors like Ray Dalio have also expressed concerns, saying the Fed’s current strategy resembles “a bubble environment” that could be risky in an over-leveraged economy.
As a result, investors are adjusting their expectations. A near-term rate cut is no longer seen as the base scenario.
Impact on the Crypto Market: No Monetary Catalyst
The crypto market has been heavily affected by the lack of positive monetary news.
- Crypto investors had already priced in the October rate cut long before it happened.
- So when it was finally announced, prices did not rise — they continued to fall.
- According to 21Shares analyst Matt Mena, the cut produced no bullish reaction because the market expected it in advance.
- With the probability of a December rate cut declining, the crypto market is losing short-term momentum.
Less likelihood of monetary easing means tighter liquidity, and therefore less capital available for risk assets like crypto.
If the Fed does not cut rates in December, the current consolidation phase in crypto could last longer. Markets are now waiting for stronger signals from central banks.
Even though analysts at Goldman Sachs and Citigroup still expect three rate cuts in 2025, this outlook is too far ahead to provide immediate support for crypto markets.
