Bitcoin’s trajectory in the coming weeks is intricately linked to the impending decision by the Federal Reserve on September 17. Current market sentiment anticipates a reduction in interest rates by approximately 30 basis points. Futures indicate a substantial likelihood of a 25 basis point decrease, with discussions around the potential for a more aggressive cut of 50 basis points gaining traction. Some analysts assert that such an expansive move could catalyze Bitcoin’s ascent towards its previous all-time highs.
According to data from the CME Group’s FedWatch tool, there is nearly a 90% probability of a 25 basis point cut, while the chances of a larger 50 basis point reduction sit around 10%. Meanwhile, Polymarket’s $21 million prediction market shows slightly elevated expectations, with an 82% likelihood of a 25 basis point cut and a 15% chance for a 50 basis point decrease.
The economic landscape has shifted significantly in recent months. Notably, U.S. labor figures experienced a downward revision, shedding 911,000 jobs through March 2025, marking the deepest adjustment since 2009 and reflecting a slowdown in economic momentum. Inflation indicators are mixed; the core Consumer Price Index (CPI) registered at 3.1% in August, while the core Personal Consumption Expenditures (PCE) came in at 2.9% for July, leaving policymakers in a precarious position.
In the Treasury markets, expectations for interest rate easing are evidenced at the short end of the curve, whereas longer maturities are influenced by term premium and fiscal conditions. A recent Reuters poll suggests that the yield curve may steepen as year-end approaches, forecasting two-year yields near 3.40% and 10-year yields around 4.25%, resulting in a spread of approximately 85 basis points. Despite potential cuts, the policy rate would still exceed the Cleveland Fed’s neutral rate estimate of 3.7%.
Key economic indicators set to be released shortly, including the CPI on September 11 and retail sales data on September 16, could significantly influence the decision-making process regarding interest rate adjustments before the Fed’s meeting. Bitcoin previously surged to nearly $124,000 in mid-August amid anticipatory easing bets, setting the stage for traders to remain vigilant on movements in the U.S. dollar, real yields, and forthcoming statements from the Federal Reserve.
