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Speculation Rises: Will the Fed Lower Rates? Crypto and Wall Street Traders Remain Cautious

Will the Fed Cut Rates? Crypto and Wall Street Traders Aren’t Betting on It

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The crypto market has been experiencing a downward trend in prices, compounded by ongoing macroeconomic challenges, causing concern among traders. How bleak is the atmosphere in the world of crypto today?

To gauge sentiments, look to prediction markets like Polymarket and Fed fund futures on the Chicago Mercantile Exchange. These speculative forecasts on potential Federal Reserve interest rate cuts are showing conflicting views.

At Polymarket, traders initially estimated a 7% chance in March that the Fed would maintain interest rates at the same level until 2024. However, now there is a 38% probability that the Fed will not implement any rate cuts this year.

This outlook is more pessimistic compared to the 23% chance of no rate cuts projected earlier by Bianco Research. Despite CME traders previously anticipating up to six rate cuts, they are now only expecting two.

One Polymarket user, JustKen, expressed frustration, hoping for rate cuts to come through. The user placed a $1000 bet on a rate cut in June but is currently down 85%.

Typically, higher interest rates devalue riskier assets like stocks and crypto as it becomes less appealing compared to holding cash or U.S. Treasury bills.

Following the March policy meeting, the Fed projected reducing interest rates by three quarter-percentage points by year-end. However, due to concerns about inflation and wage growth in the U.S., there is less certainty among Fed policymakers and market participants.

Fed Chair Powell emphasized the need for confidence in inflation reaching the 2% target before considering rate reductions further. Inflation stood at 3.5% in the 12 months up to March, according to the Bureau of Labor Statistics. The report led to a dip in the crypto market following its release.

Edited by Ryan Ozawa.

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