3 Minutes
Economist Timothy Peterson warns that recent Federal Reserve moves could produce a sharp, positive shock for Bitcoin and other cryptocurrencies. With the Fed beginning to cut interest rates in September 2025, market participants may be underestimating how quickly monetary policy could shift — a development that historically favors risk assets such as Bitcoin and altcoins.
Why markets might be caught off guard
Peterson told Cointelegraph that markets are currently underpricing the likelihood of rapid rate cuts over the coming months. He argued that the Fed’s envisaged gradual path is historically unprecedented and that a faster-than-expected easing cycle would produce a surprise effect. According to Peterson, this surprise could drive a substantial lift in Bitcoin and altcoin prices within the next three to nine months.
Recent Fed action and market pricing
On Sept. 17 the Fed implemented its first 2025 reduction, trimming rates by 25 basis points — a move largely anticipated by markets. The CME FedWatch Tool showed a high probability of a quarter-point cut ahead of the announcement. CME data later indicated market pricing of roughly a 91.9% chance of another 25-basis-point cut at the Oct. 29 meeting, leaving a small probability that rates will remain unchanged.
Short-term market reaction
Bitcoin briefly rose to about $117,000 in the hours before the Fed’s September cut but later pulled back to near-preannouncement levels, trading around $115,570 at the time of publication, according to CoinMarketCap. Over the prior 30 days, Bitcoin was up roughly 1.0% on the same data source. Lower interest rates typically make fixed-income products less attractive and can redirect capital into risk-on assets like cryptocurrencies.
Institutional views and outlook
Financial firms differed ahead of the September Fed decision: some, including Standard Chartered, had expected a more aggressive 50-basis-point reduction, while leaders such as Goldman Sachs’ CEO David Solomon anticipated the 25-basis-point move that ultimately occurred. Fed officials themselves have signaled the possibility of multiple quarter-point cuts this year, although Chair Jerome Powell emphasized that the path is not pre-set.
What crypto investors should watch
Traders should monitor Fed communications, economic data that influence rate expectations, and market-implied probabilities via tools like CME’s FedWatch. Rapid changes in rate expectations can increase volatility in Bitcoin (BTC), Ethereum (ETH), and broader altcoin markets — presenting both opportunities and risks for investors focused on the evolving macro backdrop.
Source: cointelegraph
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