What Happens to BTC if the FED Announces a Jumbo Rate Cut as Bitcoin Hits the $60,000 Mark?

Bitcoin (BTC) rose today, approaching $60,000 as traders became increasingly optimistic that the Federal Reserve would decide to implement a significant rate cut.

Bitcoin's price rose 2.5% on the day to $59,735, reversing losses from September, according to CoinGecko.

BTC had fallen to as low as $53,300 just a week ago after a weaker-than-expected August employment report raised concerns about the U.S. economy. However, sentiment has shifted ahead of the Federal Reserve meeting, where it is expected to cut interest rates for the first time since 2020.

Initially, investors were expecting a 25 basis point cut, but recent reports from the Wall Street Journal and the Financial Times suggest the central bank could consider a more aggressive 50 basis point cut. As of Friday, the probability of a 50 basis point cut had risen to 43% from 28% the day before, according to CME Group data.

The change in outlook is leading policymakers to focus more on the health of the labor market as inflation slows toward the Fed’s 2% target. A larger rate cut could ease monetary conditions by pushing the Fed’s benchmark rate closer to neutral. But some analysts warn that a more aggressive cut could signal deeper concerns about a potential recession, which could have a negative impact on riskier assets like Bitcoin.

“Lower monetary policy and lower real interest rates tend to benefit peers like gold and Bitcoin while weakening the dollar,” said Grayscale Research Director Zach Pandl. “However, if the Fed were to cut 50 basis points, markets could interpret that as a sign that the Fed is worried about the economy, which could paradoxically hurt riskier assets, including Bitcoin.”

*This is not investment advice.