The probability of the Fed lowering interest rates in September is 89.6%, affecting the Digital Money market.

According to CME’s “Fed Watch”: The probability of the Fed holding interest rates steady in September is 10.4%, while the probability of a 25 basis point rate cut is 89.6%. The probability of the Fed holding interest rates steady in October is 4.9%, the cumulative probability of a 25 basis point rate cut is 47.3%, and the cumulative probability of a 50 basis point rate cut is 47.9%.

• Cryptocurrency Prices Rise: In September last year, the Fed announced a reduction of the federal funds interest rate by 50 basis points to 4.75%-5.00%. After the interest rate cut news was announced, the cryptocurrency market surged, with Bitcoin soaring from $59,000 to above $63,000 on September 19 last year, marking a daily increase of 6%. Ethereum also rose from $2,200 to break above $2,400, and on September 23 of the same year, it reached the $2,600 mark. The overall market capitalization of crypto assets increased by 6% five days after the interest rate cut, reaching $2.3 trillion.
• Increased Market Liquidity: A Fed rate cut usually lowers borrowing costs, releasing more liquidity into the market. Lower interest rates tend to weaken the dollar, and since the dollar is the primary quote asset for Bitcoin, a weaker dollar typically pushes up the price of Bitcoin in dollar terms. At the same time, loose monetary policy encourages investors to seek higher-yield alternative assets, and cryptocurrencies, as a high-risk, high-return asset, may attract more capital inflow from investors.
• Investor Confidence Improvement: After the interest rate cut news was announced, Bitcoin spot ETFs ended 8 consecutive days of net outflows, achieving 4 consecutive days of net inflows since September 12 last year, and the confidence of off-market funds is gradually recovering. Many market professionals are optimistic about the Fed’s interest rate cuts, believing that this will boost Bitcoin and the cryptocurrency market. For instance, Anthony Scaramucci, founder of the hedge fund Sky Bridge, believes that with the Fed’s series of interest rate cuts and clearer regulation of U.S. crypto assets, Bitcoin will reach a historic high by the end of the year.