Key Takeaways
- 54% of Polymarket users correctly predicted the 50 bps Fed rate cut, outperforming 92% of economists.
- The crypto market value grew by 3.7% following the rate cut, while equities markets closed negatively.
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The majority of economists’ forecasts for the Fed interest rate decision on Sept. 18 were wrong, with 105 out of 114 predicting a 25 basis points (bps) cut. This is equivalent to 92% of forecasts. Interestingly, 54% of prediction market Polymarket users placed their bets on the right outcome of 50 basis points.
The bets on the Fed decision yesterday amassed nearly $59 million, with $10.9 million allocated to the 50 bps decrease.
Yet, despite having the majority of the odds, the largest amount of bets was placed at the “no change” outcome, with $23.5 million in the poll. A 25 bps increase registered the second-largest bet amount, with $17.6 million in the pot expecting this outcome.
The chances of a 50 bps rate cut started rising in the middle of last week, culminating in a 61% chance shown by Fed funds futures yesterday, as reported by Reuters.
Notably, the optimism around a deeper rate cut was met with an increased appetite for risk from investors. Matt Hougan, CIO of Bitwise, highlighted an increase in inflows toward spot Bitcoin (BTC) exchange-traded funds (ETFs), which suggests that BTC is becoming a “go-to tool for investors looking to go risk-on.”
Crypto rises, equities tank
The first cut in the US interest rate over the past four years…
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