Bitcoin’s open interest has surged close to $40 billion as traders position themselves for what many anticipate will be a key decision from the U.S. Federal Reserve regarding interest rates. With the Fed meeting scheduled for Wednesday, market expectations indicate a strong probability of a quarter-point rate cut, which could enhance the appeal of riskier assets like cryptocurrencies.
Current sentiment among traders reflects optimism fueled by several economic indicators. Data from July and August has suggested a weakening labor market and a decline in core inflation rates, both of which contributed to the Fed’s recent decision to cut rates. Additionally, the ongoing U.S. government shutdown has resulted in a lack of new economic data, constraining the Fed’s perspective on the current economic environment. Nonetheless, recent comments from Fed Chair Jerome Powell hint at a potential shift away from quantitative tightening, further supporting the belief that additional rate cuts are imminent.
Predictive market Myriad, managed by Decrypt’s parent company Dastan, shows users pricing a 92.6% likelihood of a quarter-point cut this week. This optimistic outlook is manifesting in the crypto markets, where Bitcoin’s aggregated open interest, which reflects the total value of all open derivatives positions, has reached $37.63 billion, as reported by CryptoQuant. The cryptocurrency has experienced a remarkable rally, climbing from approximately $107,600 just last week to around $116,000, supported by an increase in open interest from $33 billion. This trend suggests that many investors are strategically positioning themselves ahead of the pivotal Fed meeting.
While open interest has climbed, it still falls short of the $47 billion recorded on October 6, when Bitcoin reached its all-time high of $126,080, according to CoinGecko data. Some analysts caution that much of the potential upside may already be factored into current market prices. Gracy Chen, CEO of Bitget, emphasized that the market’s widespread expectation of a 25-basis-point cut to a target range of 4.00–4.25% appears to be already integrated into asset prices. Chen also noted that despite the uncertainties brought on by the government shutdown, the Fed is likely to proceed with its planned decisions as monetary policy generally operates independently of congressional actions.
Chen elaborated on market conditions, suggesting that Powell may signal a gradual easing cycle, contributing to a broader liquidity expansion that could benefit risk assets. “Bitcoin’s rebound” over the weekend, bolstered by strong inflows into exchange-traded funds (ETFs) and decreasing trade tensions, marks a bullish sentiment shift among investors. If Bitcoin manages to maintain its position above $112,000, projections suggest it could rise toward $118,000 to $120,000 by the end of the month.
However, analysts remain vigilant about the risks associated with leverage-driven volatility in the markets. As traders continue to navigate this environment filled with potential rewards and hazards, the focus remains on waiting for the outcomes of the Fed’s meeting, which promises to have significant implications for the crypto landscape and beyond.
