Markets Bet Big on Fed Rate Cut as Traders Eye Liquidity Shift
- Markets expect a 25 bps rate cut as traders assign 98% odds ahead of the October Fed meeting.
- CME FedWatch data shows near-certainty of a rate cut, marking a pivot toward easier policy.
- Speculation grows that Fed may end quantitative tightening, boosting the global liquidity outlook.
With just hours before the Federal Reserve’s policy meeting on October 29, 2025, traders appear almost certain about the outcome. Markets across both traditional finance and crypto are overwhelmingly confident that the central bank will deliver a 25 basis point interest rate cut. According to data from Polymarket, traders are betting on a 98% probability of a quarter-point reduction.
Fed Expected to Ease as Growth Cools
The CME FedWatch Tool confirms this consensus, showing a 97.8% chance that the Fed will lower its benchmark rate to the 3.75–4.00% range. The move would follow September’s first cut of the year, marking a clear pivot toward a more accommodative stance.
Traders anticipate that the decision will indicate recent signs of declining inflation and labor market softening. The economy of the U.S. has reported a slow rate of job creation and easing price strains in the last several months, making stability a priority for policymakers. Economists believe that the Fed is determined to continue using its incremental steps to keep the momentum without aggressive tightening or easing drastically.
Attention now turns to Chair Jerome Powell’s press conference, set to begin at 2:30 p.m. ET, shortly after the announcement. Markets will closely analyze his tone and remarks for clues about the central bank’s direction heading into the final months of 2025. Powell’s comments could reveal how long the easing cycle might continue. It may also indicate whether quantitative tightening (QT) will end soon.
QT Debate Sparks Crypto Interest
Speculation is growing that the Fed could also signal an end to its balance sheet reduction process. Quantitative tightening involves reducing the size of the Fed’s balance sheet by letting maturing securities roll off without reinvestment. If the Fed halts QT, it could stop shrinking reserves in the banking system, increasing dollar liquidity globally.
Research done by the Federal Reserve Bank of Cleveland shows the significance of maintaining sufficient reserves. The September 2019 liquidity shortfall, which caused repo market instability, prompted emergency interventions from the Fed. This was also the time when the value of Bitcoin increased significantly as more liquidity was introduced to financial markets.
Related: CPI Slows to 3%, Fueling Bitcoin Optimism and Fed Cut Bets
Crypto traders are paying close attention to this meeting, making comparisons to the incident in 2019. They see similarities in the setup, like slowing growth, high liquidity expectations, and a dovish pivot by the Fed. According to analysts, a more liquid environment will favor risk assets, such as Bitcoin and other cryptocurrencies.
Still, this time, the digital asset market is more mature and faces higher regulatory scrutiny. Any liquidity boost reaction would thus not be the same as in earlier cycles. The wider market factors, such as inflation patterns and fiscal policy, will tend to influence how cryptocurrencies react.
With the decision essentially priced in, investor focus now centers on Powell’s message about future rate paths. Any indication of slower balance sheet reduction or additional rate cuts could further lift sentiment in equity and crypto markets. The outcome will also set the tone for the year’s final stretch, with investors weighing how far the Fed might go to stabilize growth. For now, markets appear convinced that the central bank will maintain a steady hand, offering modest support rather than sharp intervention.
