The probability of the Fed lowering interest rates in September skyrocketed to 92.2%! The crypto market is迎potential favourable information, how will the rate cut cycle impact Bitcoin and encryption assets?

Question

According to the latest data from the CME FedWatch Tool, the probability of the Fed starting to cut interest rates in September has surged to 92.2%, a leap from 41% at the end of July. This shift in expectation is mainly driven by weak employment data (the unemployment rate rose to 4.2% in July) and tariffs having a weaker than expected impact. Goldman Sachs, Citigroup, Wells Fargo, and UBS all predict that rate cuts will begin in September, with Goldman Sachs expecting three cuts this year (each by 25 basis points), targeting a terminal interest rate of 3.00%-3.25%. Historical data shows that rate cut cycles often lead to capital flowing into high-risk digital assets, and the crypto market is expected to benefit. This article will analyze the logic behind the rising expectations of rate cuts, details of institutional predictions, and the potential impact paths on the crypto market.

Interest Rate Cut Expectations Surge: Employment Data and Tariff Effects as Key Drivers Since December 2024, the Fed has maintained interest rates in the 4.25%-4.5% range. However, current market expectations have seen a significant reversal, with the probability of rate cuts in September jumping from 41% at the end of July to 92.2%. The core driving factor behind this change is:

Labor Market Cooling: The unemployment rate in the U.S. rose to 4.2% in July, and previous employment data has been criticized for significantly overstating new job creation, indicating a weak job market.
Tariff impact weakened: Goldman Sachs analysts pointed out that early evidence suggests that the summer tariffs have an impact on inflation that is "slightly less than expected", reducing the difficulty and controversy of early interest rate cuts.

Four major institutions speak out: September rate cut becomes consensus, terminal interest rate target clear Many heavyweight financial institutions have updated their forecasts, forming a strong consensus on the start of rate cuts in September:

Goldman Sachs (Goldman Sachs): Expects 25 basis points rate cuts in September, October, and December (a total of 75 basis points), and has lowered the terminal Interest Rate target for 2026 to 3.00%-3.25% (anticipates two additional rate cuts).
UBS (: Predicts an interest rate cut of 100 basis points (most aggressive) this year.
Citi )Citi( and Wells Fargo )Wells Fargo(: Both support the start of a rate cut cycle within the year.

Crypto Market Focus: Interest Rate Cut Cycle May Become Catalyst for Digital Asset Rise The Fed's potential interest rate cut actions are significant for the crypto market:

Significant Historical Relevance: Lowering interest rates usually means decreasing borrowing costs, prompting capital to flow into high-risk, high-return assets like Bitcoin. Historically, a shift in monetary policy towards easing has often been accompanied by a rise in crypto market prices. Conversely, if the expectations for rate cuts are not met (as in July of this year), it can easily trigger a market correction.
Market sentiment turns optimistic: Crypto community analysts (like Ted Pillows) have expressed strong bullish expectations: "I am very optimistic about the fourth quarter, with key drivers including potential Fed rate cuts, ongoing economic resilience, and improved regulatory clarity." The current market's high sensitivity to monetary policy lays the groundwork for potential changes in the crypto market in 2025.

Risk Warning: Disputes over Data Accuracy Remain Despite soaring expectations for interest rate cuts, renowned economist and crypto asset critic Peter Schiff )Peter Schiff( questions the data supporting the interest rate cuts:

"Many people are now expecting the Fed to lower interest rates, as previous employment data has been revealed to severely overestimate job creation. However, the inflation data is equally inaccurate. The labor market is indeed weaker, but inflation is actually much stronger than the Fed claims."
This view reminds the market: if inflation stickiness is underestimated, it may force the Fed to delay or slow down the pace of interest rate cuts, constituting a potential expectation difference risk.

Conclusion: Interest rate cut expectations reshape market logic, Crypto Assets may welcome new opportunities With a high probability of a 92.2% rate cut in September, combined with the consistent predictions from four major institutions, it signifies the market's high confidence in a policy shift from the Fed. If the rate cut occurs as expected, historical patterns and the logic of capital flow indicate that the crypto market may experience a new round of capital inflow and valuation increase. However, investors should be cautious of two key risks:

Dispute over the Authenticity of Inflation Data: As Schiff pointed out, if the actual inflation intensity exceeds expectations, it may disrupt the rate cut pace.
Expected difference volatility: The market has highly priced in interest rate cuts, and any delays or signals that are less than expected may trigger short-term selling pressure. Crypto Assets traders should closely monitor the subsequent employment and inflation data releases, Fed officials' speeches, and CME probability changes, as these factors will collectively determine whether the interest rate cut expectations can be fulfilled and their actual boosting effect on the digital asset market. In the macro context of a shift in monetary policy, Bitcoin and mainstream altcoins are expected to gain a more favorable operating environment.