Within a week, market pricing for the Fed’s October rate hike swung sharply. The probability of a hike fell rapidly from 71% to 25%, but expectations for additional hikes later in the year have not disappeared—pressure has simply shifted to December. The biggest variable for inflation is oil-price volatility amid the situation in the Middle East. This article breaks down three key observation signals, explains how monetary policy transmission works into the crypto market, and provides practical trading discipline for ordinary investors during the policy-meeting window—helping them avoid the high-volatility traps around the Fed’s decision.
Within a week, the entire market’s assessment of the Federal Reserve’s October policy meeting was completely rewritten.
Back to September 16: the Federal Reserve completed its first rate hike in three years, raising interest rates to the 3.75–4.00% range. The dot plot shows that among the 19 officials, 16 supported adding at least one more rate hike before the end of the year. On the day the decision was released, the market’s pricing for another rate hike in October was roughly around 50%. Most investors believed that tightening further in October was highly likely.
The reversal in expectations can happen very quickly. On September 28, the probability of a rate hike for October surged to 71%, almost fully priced by the market. Just two days later, on September 30, when the New York Fed president publicly stated that there was no urgency for a rate hike, expectations collapsed instantly—dropping from 71% to 37% in a single day. As of the latest data, the market pricing is now: 75% probability that rates stay unchanged in October, and only 25% left for a 25bp hike.
Here’s a key point that’s very easy for beginners to overlook: although expectations for a rate hike in October have cooled significantly, the probability of at least one more rate hike before the end of December is still as high as 87%. The market hasn’t completely said goodbye to rate hikes—it has just shifted the time window for rate hikes from October to later. Many people mistakenly think monetary-policy pressure is lifted, but it’s really only a short-term breather.
The root cause of this round of expectations swinging back and forth lies in the biggest disruptive factor for inflation—oil prices and the Middle East geopolitical situation.
This round of the U.S. inflation’s modest rebound is driven largely by energy prices. Once geopolitical conflicts in the Middle East escalate and push oil prices higher, the risk of an inflation rebound rises as well, and the Federal Reserve will keep the option of further rate hikes. Conversely, if oil prices keep falling and inflation pressure eases, the necessity of a rate hike in October declines accordingly. This is why the CME rate-hike probability jumps back and forth every day—it is essentially a numerical mapping of oil prices and geopolitical risk, not a fixed and unchanging outcome. You can’t treat probability as the result that has already been locked in.
For ordinary investors, there’s no need to stare at CME numbers and agonize every day. To judge the final outcome on October 28, you only need to continuously track three key core signals—these three variables are the underlying logic that ultimately determines the Federal Reserve’s final choice.
The first signal is the U.S. September CPI data released on October 14, which is the most important leading indicator. If this CPI reading is significantly lower than market expectations and the decline in inflation is confirmed, then the probability of a rate hike in October will basically drop to zero. If CPI rebounds again above expectations, rate-hike expectations will immediately rise again, and the crypto market will quickly face another round of pressure. This data release is the heaviest report in terms of weight before the policy meeting, and each time it’s published it directly triggers intense volatility in the crypto space.
The second signal is the real-time trend of international oil prices. Ordinary investors don’t need to deeply break down the details of geopolitical news; they only need to continuously track the oil-price trend. Oil prices rising persistently indicates that inflation risk is increasing, which can raise the likelihood of rate hikes. If oil prices keep falling, it weakens the Federal Reserve’s motivation to tighten policy. Sudden developments in the Middle East can happen at any time; changes in oil prices can’t be precisely predicted, and that is the biggest source of uncertainty at this stage.
The third signal is a political constraint. In the context of U.S. midterm elections, the Federal Reserve has traditionally tried to avoid making drastic monetary policy adjustments right before the election to avoid being labeled as election interference. As long as inflation data doesn’t show a dramatic, upside-than-expected rebound, the Federal Reserve is more inclined to push rate hikes back, leaving them to be implemented at the December meeting. But this is based on historical experience, not a hard rule. If inflation data runs out of control, historical precedent will immediately fail.
Many beginners wonder: what exactly does the Federal Reserve’s rate hikes have to do with the crypto market? There are three transmission paths from monetary policy to the crypto space.
The first is the strength of the U.S. dollar. When rate-hike expectations rise, the U.S. Dollar Index strengthens, and all risk assets generally come under pressure. Overvalued altcoins are far more sensitive to U.S. dollar liquidity than Bitcoin, so their volatility will be significantly higher.
The second is the increase in funding costs. Rate hikes mean overall borrowing costs in the market rise. In the crypto market, a large number of leveraged speculative positions will begin to shrink. In every phase when rate-hike expectations move upward, the risk of liquidations in the contract market will expand noticeably—highly leveraged positions are hit first.
The third is the “bond yield siphon” effect of U.S. Treasuries. Currently, the 10-year U.S. Treasury yield stays around 5.2%, which is a high level after many years. Risk-free Treasuries can offer very high returns. Some capital will withdraw from risk markets and flow back into the bond market, indirectly suppressing the upside space for crypto prices.
In short: as long as rate-hike expectations stay at a high level, it will be hard for the whole market to move smoothly in a one-direction trend. Choppy back-and-forth action will become the norm, and accounts heavily holding altcoins or using high leverage will continue to face pressure.
For this policy-meeting window, ordinary traders can remember three simple execution rules to avoid being harvested by short-term, violent volatility.
First, within 24 hours before and after the FOMC decision is released, try not to open any new positions, don’t add positions temporarily, and don’t rashly chase or cut losses. The sharp rises and falls around the decision are mostly noise-market conditions caused by institutional competition. Price often whips back and forth with fast spikes, which makes it very easy for retail investors to get stopped out. It’s not suitable for ordinary investors.
Second, don’t chase all kinds of so-called internal news. There’s no need to constantly collect various rumors. Rate-hike expectations themselves change dynamically. The probability numbers from CME update automatically every day based on economic data and officials’ remarks—just follow the public market pricing.
Third, always manage your own positions well. Whether October ultimately hikes rates or holds steady, your position should be such that you can sleep soundly even after the news is released. If you feel extremely anxious about rate-hike headlines, it means your current position is already too heavy and you need to reduce your holdings in a timely manner.
Finally, it’s important to recognize a reality: this round is only a short-term pullback in rate-hike expectations, and it doesn’t mean the era of easy liquidity is arriving immediately. Even if October chooses to hold steady, the possibility of rate hikes is still maintained for December. Over the next two months, the market will continue to be repeatedly stirred up by U.S. macro data, and it’s hard for a one-way, big trend to happen all at once. #BNB突破790美元 #Zama涨15.99%触及0.09美元 #比特币现货ETF三季度净流入63.4亿美元 #以太坊验证者退出队列增392% #IMF拨款萨尔瓦多并豁免超额购BTC $BTC
