How Fed Actions Will Trigger a Crypto Surge: Economist Warns Market Isn’t Ready

Market participants in the cryptocurrency space may be underestimating how aggressive the U.S. Federal Reserve will be in adjusting monetary policy, according to leading economists.

“There’s a significant risk that markets are not fully pricing in the possibility of rapid rate cuts in the coming months,” economist Timothy Peterson told Cointelegraph on Friday. “The Fed has never executed a gradual reduction like the ones currently being speculated, and I believe a surprise effect could catch traders off guard.”

Peterson’s comments follow the Federal Reserve’s early September rate cut — its first for 2025 — which saw interest rates reduced by 25 basis points. Leading up to the announcement, the CME FedWatch Tool indicated a 96% chance of a quarter-point cut, with only a 4% probability of a 50-basis-point decrease.

Markets Set Eyes on October Rate Cut

Bitcoin (BTC) spiked briefly to nearly $117,000 just hours before the Fed’s decision but has since retreated to around $115,570, according to CoinMarketCap. Despite the pullback, traders are pricing in strong odds of further easing. CME data shows that market expectations favor a 91.9% likelihood of another 25 basis point cut at the upcoming October 29 meeting, with only an 8.1% chance of rates holding steady.

The Federal Reserve’s officials have indicated that additional rate cuts are on the horizon — with expectations of at least two more quarter-point reductions by year’s end. Nevertheless, Fed Chair Jerome Powell emphasized that “We’re not on a pre-set path,” suggesting a degree of flexibility in their approach.

Some financial institutions anticipated an even more aggressive stance. For instance, Standard Chartered predicted a 50 basis point reduction at the September meeting, whereas Goldman Sachs CEO David Solomon expressed confidence that the Fed would adhere to a 25 basis point cut. Such rate adjustments generally bolster risk-on assets like cryptocurrencies, as lower interest rates tend to make traditional investments like bonds less attractive, encouraging investors to seek higher returns in digital assets.

As the Federal Reserve navigates these uncertain times, the crypto markets remain highly sensitive to policy signals and potential surprises, with traders closely monitoring upcoming decisions that could trigger significant price movements across Bitcoin, Ethereum, and the broader blockchain ecosystem.