A Contrarian View on Monetary Policy

Investor Kevin O’Leary is pushing back against widespread market speculation that the U.S. Federal Reserve will cut interest rates in December. While such a move is often seen as a positive signal for assets like Bitcoin, O’Leary is not positioning his investments around that expectation.

In a recent interview, O’Leary stated he doesn’t believe the Fed will cut rates and thinks there are solid reasons for them to hold steady. He pointed to persistent inflation in the system as a primary concern, noting that the Fed operates under a dual mandate of managing both inflation and employment. Despite his skepticism, market data shows a different picture. According to the CME FedWatch Tool, market participants have priced in an 89.2% probability of a rate cut in December.

Bitcoin’s Price Unfazed by Fed Decisions

Even if the Fed defies market expectations and holds rates, O’Leary doesn’t foresee a negative impact on Bitcoin’s price. He argued that the rate decision won’t “make a difference to Bitcoin,” suggesting the cryptocurrency has found a stable level for the time being. O’Leary predicts Bitcoin will likely trade within a 5% range of its current price in either direction, as he doesn’t see any major catalysts for significant upward movement in the short term.

Traditionally, crypto traders view interest rate cuts as a bullish sign for riskier assets. Lower returns on bonds and other fixed-income investments can push investors toward cryptocurrencies in search of higher yields. Consequently, an unexpected decision by the Fed to maintain current rates could introduce volatility into the market.

Market Sentiment Swings on Rate Cut Odds

The high probability currently assigned to a December rate cut follows a period of significant volatility in market expectations. As recently as November 19, the odds of a cut were as low as 33%. That sentiment shifted dramatically just two days later, with odds jumping to 69.40% following dovish remarks from New York Fed President John Williams, who suggested a rate cut was possible without jeopardizing inflation targets.

After the Fed implemented cuts in September and November, the broader market has been anticipating that the central bank would continue its policy of monetary easing through the end of the year.

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