September Fed Rate Cut Odds Plunge to 43% — Is Bitcoin’s Next Bull Run on Shaky Ground or Ready to Explode?

Well, isn’t this an intriguing twist in the crypto saga? Just when traders were gearing up to cheer for September’s Fed rate cuts, the odds took a 20% nosedive — leaving many scratching their heads and recalibrating expectations on the fly. Bitcoin [BTC] itself took a slight dip to $115.7K after Fed Chair Jerome Powell’s hawkish, cautious stance, putting a finger on inflation worries and a ‘wait and see’ game plan that has market nerves jangling. Now, here’s the burning question: with Bitcoin’s unrealized profits soaring to an eye-popping $1.4 trillion, could this mountain of latent gains tame the crypto bull run? Or are we simply on the edge of the next surge, waiting for a Fed pivot that might just reignite the fire? Stick around, because the delicate dance between Fed policy and Bitcoin’s momentum is anything but predictable — and trust me, you don’t want to blink here. LEARN MORE

Key Takeaways

Fed’s rate cuts expectation for September dropped by 20% as traders repriced their previous bullish outlook. Will the high unrealized profit slow the BTC bull run?

Bitcoin [BTC] briefly dropped to $115.7K following Fed chair Jerome Powell’s hawkish tone after holding interest rates steady on the 30th of July. 

While the decision was expected, his cautious outlook and a ‘wait and see’ approach for a September triggered a further risk-off move. Powell cited inflation risk from tariffs and noted, 

“For the time being, we’re well-positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance.”

The market quickly repriced the September rate cuts expectations following his statement. 

Fed rate cuts expectations dip

Source: CME Fed Watch tool

Before the July Fed rate decision, the odds of September rate cuts were above 63%.

As of press time, the chance for a 25 bps cut dropped to 43% while another steady rate (4.25%-4.50%) expectation surged to 57%. 

In most cases, a looser interest rate policy always boosts risk assets like stocks and crypto, Matt Mena, crypto strategist at 21Shares, told AMBCrypto.

He added, 

“For crypto, a Fed pivot could serve as a major tailwind. Looser financial conditions and rate cuts have historically fueled risk assets like Bitcoin, which has long acted as a sponge for excess liquidity.”

However, the Fed’s cautious stance could slow the ongoing bull run. But Mena noted that all conditions were set for a likely dovish pivot, 

“The setup increasingly resembles Q4 2023 – softening inflation, rising political volatility, and a Fed constrained by lagging indicators, which saw Bitcoin end the following year at $100K. The stage is set for a policy pivot. The only question is when.”

At press time, though, BTC bounced back 2% to $118.5K, but most altcoins didn’t follow suit ahead of inflation data (PCE Index). 

Source: BTC/USDT, TradingView

According to Mena, if the $114K-$115K support cracks, then BTC could go lower to $110K. 

Another risk factor for the market rally was rising BTC profitability.

Glassnode highlighted that BTC’s unrealized profit hit a record high of $1.4 trillion, and the relative unrealized profit hit levels that triggered past ATH conditions and sell pressure. 

Source: Glassnode

But crypto analytics firm Swissblock held that the BTC rally could go higher if QE (quantitative easing) or a surge in dollar liquidity begins. 

Source: Swissblock

In the short term, the macro pressure could cap BTC below $120K and elevate profit-taking. However, any potential Fed pivot in the mid-term could spark a rebound.