Why Bitcoin May Be Underpricing January Rate Cut Odds
Bitcoin’s stagnant price and near-record low volatility indicate that investors may be overlooking a growing chance of Federal Reserve policy shifts, especially as key inflation data approaches. Analysts argue that markets are too complacent, underestimating the odds of interest rate cuts by the Fed. Despite Bitcoin trading between $90,000 and $94,000 for nearly two months and its Implied Volatility Index hovering at multi-year lows, some point to political and economic factors that could soon disrupt this stability. Conflicting macroeconomic data—such as weak job growth and stubbornly high core inflation—adds uncertainty to Fed decision-making. Political pressure on the Fed, including legal action against Chair Jerome Powell, further increases the unpredictability. If inflation readings suggest the Fed will remain hawkish, little price movement is expected. However, a softer inflation print could surprise markets and trigger a sharp Bitcoin rally, as current pricing may not fully reflect the potential for more aggressive rate cuts.
