Attention, all crypto traders! The latest CME FedWatch data is out, and market expectations for interest rates have completely shifted. These key signals could directly determine the crypto market's overall trend at the end of the year, so don't take them lightly!
According to the latest data as of November 4, the probability that the Fed will leave interest rates unchanged in December has fallen to just 21.1%, while the probability of a 25-basis-point rate hike has surged to 78.9%. And the risks grow over a longer time frame: by January next year, the probability of cumulative rate hikes totaling 25 basis points is 63%, with even more than a 20% chance of cumulative hikes totaling 50 basis points. In plain English: Fed tightening is basically the market consensus from year-end into early next year, and hopes for monetary easing have been dashed!
Many beginners don’t understand the relationship between interest rate hikes and crypto, so here’s a straightforward explanation: Cryptocurrencies are classic risk assets, and they’re especially vulnerable when rate hikes tighten liquidity. Once a rate hike takes effect, the U.S. dollar and Treasury yields strengthen, and speculative capital quickly flows back into traditional markets. Bitcoin and altcoins generally come under pressure and weaken. The market is likely to remain choppy and under pressure toward year-end, making a sustained bull run unlikely.
These figures also mean that the market’s recent slight rebound is merely a recovery in sentiment, not a trend reversal. Major players have already positioned themselves ahead of the rate-hike headwinds, so repeated shakeouts and back-and-forth order sweeps are likely to become the norm.
For upcoming trades, keep a close eye on three key indicators! First, the upcoming U.S. nonfarm payroll and wage data: the stronger the figures, the firmer rate-hike expectations will be and the greater the pressure on the crypto market. Second, U.S. CPI inflation: persistently high inflation will lock in the Fed’s rate-hike path. Third, public remarks by Fed officials, which could trigger short-term market volatility at any moment.
Here are some practical trading strategies! At this stage, firmly avoid going all in or chasing highs and trying to catch bottoms. Overall, stay lightly positioned and wait on the sidelines, focusing on selling high and buying low. For short-term trades, get in and out quickly without getting attached. For the long term, stay on the sidelines for now and avoid downside risk. Don’t be misled by a small short-term rebound.
Overall, the macro outlook for the crypto market is bearish toward year-end. Positive news has largely been priced in, while bearish risks are building. Trading lightly with the trend and keeping risk under tight control is the safest approach for now!
Do you think the Fed will raise rates in December as expected? Could this correction bring a buying opportunity? Share your thoughts in the comments!
⚠️Risk warning: This article provides market information and analysis only and does not constitute investment advice.
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