Economists say crypto market participants may be underestimating how aggressive the US Federal Reserve is by changing policy direction.
“The market is reducing the likelihood of rapid rate cuts in the Federal Reserve in the coming months,” economist Timothy Peterson told Cointelgraf on Friday.
“There hasn’t been a gradual decline in the rates the Fed is currently expected,” Peterson explained that he expects a “surprise effect” to kick in and catch the market offside.
“It shakes Bitcoin and goes up a lot. And I think it’ll happen in the next three or nine months.”
Peterson’s comments come days after the Fed implemented 25 basis points on September 17th the 2025 first-rate cut. Rate reductions were widely expected, with the CME FedWatch tool showing a 96% chance of a quarter-point reduction and a 4% chance of a 50-point reduction in time to the announcement.
The market expects another rate cut in October
According to CoinmarketCap, Bitcoin (BTC) surged to 117,000 hours a day a day before the Fed’s cut announcement, but then retreated to the level seen the previous day, trading at $115,570 at publication.
CME data shows that market participants price an additional 25 basis point rate reductions at the October 29 meeting, with only an 8.1% chance of the rate remaining changed.
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Fed officials said they are hoping for two more quarter point rate cuts this year. But Federal Reserve Chairman Jerome Powell said, “We haven’t gone on the set path ahead of time.”
Financial institutions were split in the Federal Reserve’s September move
Some financial institutions hoped for a more aggressive rate cut at their September meeting, with standard charter forecasts predicting a 50 basis point cut.
However, Goldman Sachs CEO David Solomon was sure the Fed would stick to a 25 basis point cut.
Rate cuts tend to be bullish for risk-on assets, including cryptocurrencies, as traditional investments such as bonds and term deposits are not advantageous for investors.
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