Bitcoin Open Interest Nears $40B Ahead of Fed Rate Cut

The U.S. Federal Reserve’s interest rate decision on Wednesday has become the dominant catalyst for cryptocurrency markets, with Bitcoin’s aggregated open interest—representing the total value of all open derivatives positions—surging to $37.63 billion according to CryptoQuant data. This represents a significant increase from the $33 billion level seen just last week, indicating that traders are aggressively positioning ahead of the Federal Open Market Committee (FOMC) meeting. The sentiment driving this activity stems from prediction market Myriad, owned by Decrypt’s parent company Dastan, where users have assigned a 92.6% probability to a quarter-point rate cut this week.

Bitget CEO Gracy Chen confirmed the market consensus, telling Decrypt that “the upcoming FOMC meeting is widely expected to deliver a 25-basis-point rate cut to 4.00–4.25%, a move markets have already priced in.” Chen emphasized that despite the ongoing U.S. government shutdown creating fiscal uncertainty, the Fed’s monetary policy decision should proceed independently of Congress. This expectation of monetary easing has provided the fundamental backdrop for Bitcoin’s recent rally from $107,600 last week to just above $116,000, with the price movement closely tracking the expansion in open interest.

The Federal Reserve’s potential rate cut decision comes amid a complex economic landscape marked by recent labor market deterioration in July and August reports, coupled with declining core inflation metrics. These factors prompted the central bank’s initial cut last month, establishing a pattern that market participants now expect to continue. The ongoing U.S. government shutdown has created a significant data vacuum, limiting the Fed’s visibility into current economic conditions, yet Fed Chair Jerome Powell’s recent comments about ending quantitative tightening have provided crucial insights into the central bank’s thinking.

According to Gracy Chen, Powell is likely to signal a gradual easing cycle during the upcoming meeting—a combination that points to broader liquidity expansion supportive of risk assets like Bitcoin. “Bitcoin’s rebound…over the weekend reflects this improving sentiment, with strong ETF inflows and easing trade tensions fueling momentum,” Chen noted. This analysis suggests that the Federal Reserve’s monetary policy direction, rather than short-term political or fiscal developments, remains the primary driver for cryptocurrency market sentiment and positioning.

The relationship between Bitcoin’s price movement and open interest expansion reveals much about current market psychology. While Bitcoin has rallied from $107,600 to above $116,000, open interest remains notably below the October 6 peak of $47 billion recorded by CoinGecko, when Bitcoin reached its record high of $126,080. This discrepancy suggests that while trader confidence is returning, market participants remain cautious compared to previous market peaks. The current open interest approaching $40 billion indicates renewed but measured optimism among derivatives traders.

Gracy Chen provided specific technical analysis, noting that “if Bitcoin holds above $112,000, it could push toward $118,000 to $120,000 by month’s end.” This projection aligns with the improving market structure and suggests that the current price levels represent critical support zones. However, Chen also sounded a note of caution, emphasizing that “leverage-driven volatility remains a risk” despite the generally bullish outlook. This warning highlights the delicate balance between optimistic positioning and the inherent risks of highly leveraged derivatives markets.

The convergence of Federal Reserve policy expectations, Bitcoin ETF inflows, and technical market structure creates a complex tapestry for traders navigating the current environment. While the fundamental backdrop appears supportive for risk assets, the high leverage evident in the derivatives market means that any deviation from expected outcomes could trigger significant volatility. As Bitcoin open interest approaches the psychologically important $40 billion level, market participants must weigh the potential rewards of continued monetary easing against the risks inherent in leveraged positions during uncertain economic conditions.