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 prompted a positive reaction from risk assets.

Bitcoin (BTC) is up by 4.8% in the past 24 hours, followed by good performances from Ethereum (ETH), Binance Coin (BNB), and Solana (SOL), with spikes of 5.3%, 4.2%, and 8% respectively.

The positive reaction was registered by the crypto market as a whole since the sector’s total value grew by 3.7%, surpassing $2.26 trillion.

However, the equities market didn’t manage to close in a positive tone yesterday. Despite some upward movement registered following the rate cut decision, the S&P 500, Nasdaq, and Dow Jones ended the trading day with drawdowns of 0,29%, 0,3%, and 0,23% respectively.