Bitcoin traders are building leveraged positions across the crypto derivatives market ahead of this week’s crucial Federal Reserve meeting as markets anticipate further interest rate cuts this year.
The US Federal Reserve’s interest rate decision on Wednesday has been a focus among investors, with a quarter-point rate cut widely expected that could increase appetite for risky assets, including cryptocurrencies.
This sentiment stems from a combination of recent economic trends, including the deterioration in the labor market and the decline in core inflation, as seen in the July and August reports, both of which prompted the central bank’s policy decisions. initial cut last month.
The ensuing U.S. government shutdown has created a data vacuum that limits the Fed’s visibility into the economy. Still, Fed Chairman Jerome Powell’s recent comments about ending quantitative tightening some clues It influences the thinking of central banks.
Expectations for further rate cuts are reflected in Myriad, a prediction market owned by the company. decryption Parent company Dastan assigned There is a 92.6% probability that interest rates will be cut by a quarter point this week.
Optimism about policy change is already fueling activity in the crypto market, with Bitcoin’s total open interest (representing the total value of open positions in all derivatives) surging to $37.63 billion, according to data from CryptoQuant.
The top cryptocurrency’s rise from $107,600 last week to just over $116,000 was backed by an increase in open interest from $33 billion, indicating investors are bracing for this week’s events.
Notably, open interest remains below its October 6th level of $47 billion, when Bitcoin hit an all-time high of $126,080. CoinGecko data. The announcement comes amid the belief that further upside may already be priced in, according to some sources.
“A 25 basis point rate cut to 4.00-4.25% is widely expected at the next FOMC meeting, and the market is already pricing in this move,” Gracie Chen, CEO of BitGet, said in a statement. decryption. “Despite the ongoing U.S. government shutdown increasing fiscal uncertainty, the Fed’s decisions should proceed as scheduled because monetary policy operates independently of Congress.”
Chen added that Powell is likely to signal a gradual easing cycle, a combination that suggests broad liquidity expansion to support risk assets.
“Bitcoin’s weekend rally reflects this improving sentiment, with strong ETF inflows and easing trade tensions fueling momentum,” Chen said. “If Bitcoin sustains above $112,000, it could move towards $118,000 to $120,000 by the end of the month, but the rise in open interest to nearly $40 billion suggests renewed confidence among traders.
Still, “leveraged volatility remains a risk,” the analyst said.
