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Will the Fed cut rates? Cryptocurrency traders and Wall Street aren’t betting on it
A week-long decline in digital asset prices, exacerbated by continuing macroeconomic difficulties, has rattled traders. How dark are the vibes in the cryptocurrency world today?
A measure of optimism – or lack thereof – can be found in betting markets such as Polymarket and Fed funds futures, which are traded on the Chicago Mercantile Exchange. These hazy but collective predictions about when the Federal Reserve might cut interest rates reveal a disparity.
On Polymarket, a decentralized prediction market platform, traders in March saw a 7% chance that the Fed would hold interest rates steady through 2024. Now, traders are writing in pencil a 38% chance that the Fed will not cut rates this year.
This is significantly more pessimistic than the 23% probability of rate cuts to zero calculated Tuesday by investment analytics firm Bianco Research. The outfit used data from the ECM’s FedWatch toolwhich shows CME traders are looking at about a 45% chance of the Fed cutting rates in September.
After predicting as many as six rate cuts earlier this year, CME traders are now predicting just two.
“Just cut the rates, bro, please,” a Polymarket user named JustKen commented on the page where traders bet about $1.2 million on the Fed’s next moves. Second PolymarketJustKen is down 85% on a $1,000 bet that the Fed will cut rates in June.
Higher interest rates typically suppress the value of riskier assets like stocks and cryptocurrencies as the payments become less attractive than owning securities like cash and U.S. Treasury bills.
After the March policy meeting, the Fed prediction rate cuts of three-quarters of a percentage point until the end of the year. Among the recent signs of stubborn inflation in the United States and stronger than expected wage growthHowever, Fed policymakers and financial market participants have become less confident.
“The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” Powell She said Wednesday, referring to the central bank’s annual inflation target.
Consumer prices rose 3.5% in the 12 months through March, the U.S. Bureau of Labor Statistics said in a report last month. The cryptocurrency market shows that annual inflation remained unchanged compared to February data slipped immediately after the publication of the report.
By Ryan Ozawa.