The Fed's decision is imminent: Interest rate cut expectations are driving the crypto market to pump, is the altcoin season really coming?

The Fed's upcoming meeting on September 17 has sparked optimism in the Crypto Assets market. With the prediction market assigning a 20% chance of an aggressive 50 basis point rate cut, market sentiment has shifted significantly. The price of Bitcoin has surpassed $113,750, with a total market capitalization of $3.88 trillion. Meanwhile, several indicators show that alts are outperforming Bitcoin, which may herald the arrival of a new "altcoin season."

Interest rate cut expectations heat up, market bets on aggressive easing

After the recent economic data, especially the producer price index (PPI) dropping from 3.3% to 2.6%, market expectations for the Fed to adopt a more aggressive monetary easing policy have significantly heated up.

Prediction Market: Leading prediction platforms Kalshi and Polymarket both reflect this sentiment. Traders on Kalshi have set the likelihood of a rate cut exceeding 25 basis points at 16%, while Polymarket has set the probability of a 50 basis points rate cut at 15.3%.

Asset rotation: A decrease in interest rates typically reduces the attractiveness of government bonds, prompting funds to flow from bonds to risk assets such as Crypto Assets, thereby driving the market up.

Signals of Altcoin Season Emerge

Multiple market indicators suggest that alts are outperforming Bitcoin, indicating that the "altcoin season" has reached peak levels.

Indicators Soar: The altcoin season index from Blockchain Center and CoinGlass has reached 76 (out of 100), while CoinMarketCap's index stands at 67. By definition, an altcoin season is recognized when 75% of the top 50 Crypto Assets outperform Bitcoin over a 90-day period. The current reading indicates that this threshold has been reached for the first time since the end of 2024.

Market capitalization growth: Excluding Bitcoin and stablecoins, the total market capitalization of altcoins has reached $1.63 trillion, nearing the historical peak of $1.7 trillion in November 2021.

Market Performance and Future Outlook

As funds flow into alts, Bitcoin's market dominance is declining. This decoupling often intensifies during bull markets and may signal a broader altcoin rally.

Specific performance: In the past 24 hours, Dogecoin rose over 5% to $0.25; Avalanche surged nearly 11% to $29, reaching its highest level since January. Other alts such as Hyperliquid, Stellar, Litecoin, and Toncoin also rose over 3%.

Bullish signal: Tether has rarely minted 2 billion USD in USDT, which is seen as a sign that institutions are preparing for increased market activity.

Outlook: The Fed's decision on September 17 will determine whether the current momentum can be sustained. A 50 basis point rate cut could accelerate the altcoin rally indicated by market indicators.

Conclusion

The current crypto market is at a critical crossroads, with its future direction entirely dependent on the policy decisions to be announced by the Fed. Under the dual influence of favorable PPI data and positive bets in the prediction market, market optimism has reached a peak. If the Fed really takes aggressive rate cuts as some in the market wish, it would not only further boost Bitcoin but also ignite the entire altcoin sector, leading to an explosion in the fourth quarter. However, if the decision fails to meet expectations, the market could also face a dual correction in sentiment and prices.