Why Bitcoin May Be Underpricing the Chances of Rate Cuts in January

Bitcoin’s flat price action and subdued volatility suggest investors may be overlooking a shift in Federal Reserve expectations, potentially leaving the token mispriced ahead of key inflation data, analysts said.

The core of the argument is that markets are too complacent.

“The risk to tomorrow’s CPI print feels a bit asymmetrical to me, as the market expects a ~60% chance of no more cuts under Powell,” said Quinn Thompson, CIO of Lekker Capital, tweeted on Monday.

He said the roughly 75% chance of just one cut before the midterm elections also “seems too low,” especially with Trump’s new Federal Reserve appointee Stephen Miran in a position to influence policy.

Bitcoin is down 1.2% in 24 hours and is trading at $91,150, according to CoinGecko data. The top crypto has been stuck in the $90,000 to $94,000 range for almost two months.

It comes as Bitcoin’s Implied Volatility Index – a measure of expected price movements – is hovering around 43, at the extreme low of its multi-year range, indicating that traders are not expecting a major catalyst and that the market is reflecting a similar mispricing as the chances of rate cuts.

“Markets are underestimating the chances of a rate cut,” said Sean Dawson, head of research at Derive. Declutterfollowing the too low statement. The CME FedWatch tool estimates the chance of a reduction on January 28 at only 5%. “In my head it’s at least a 10% chance,” Dawson said.

He justifies this with contradictory macroeconomic data: The US created just 50,000 jobs in December, the worst annual growth since 2003, while core inflation remains stuck at around 2.6%, above the Fed’s target. These numbers, distorted by tariffs and last year’s government shutdown, make the current CPI an important catalyst.

That argument is strengthened by unprecedented political pressure, especially from the criminal justice department court case to Fed Chairman Jerome Powell.

“The allegations against Powell show that Trump is willing to go after any Fed member who disagrees with his positions on the rate cut,” Derek Lim, head of research at crypto market maker Caladan, told me. Declutter. “The administration’s attempt to control the Fed is something that is unprecedented.”

The setup favors greater movement in one direction. If inflation keeps the Federal Reserve on an aggressive path, Bitcoin will likely trade sideways. But a softer reading could catch markets off guard, causing prices to rise sharply, analysts said.