The odds of an emergency Federal Reserve interest rate cut have jumped sharply on Polymarket and Kalshi as Donald Trump’s trade war intensifies.
A Polymarket poll with over $360,000 in assets shows that these odds have surged to 31%, up from 15% on April 1. A similar prediction market on Kalshi places the odds at 41%, the highest level since November last year.
These expectations have climbed as multiple analysts downgraded their economic outlook for the U.S. amid the expanding trade war. Notably, the U.S. recently imposed a 104% tariff on all Chinese goods, a sweeping measure likely to significantly impact both economies. China exports roughly $432 billion worth of goods to the U.S. annually, out of a total trade volume of $582 billion between the two nations.
The U.S. has also enforced broad-based tariffs on several key trade partners, including the European Union, Japan, South Korea, and Vietnam.
Top Wall Street firms like JPMorgan, BlackRock, and Goldman Sachs have all raised their recession forecasts. for the year. As a result, an emergency interest rate cut by the Federal Reserve is increasingly viewed as a likely response to ease borrowing costs and inject liquidity into the economy.
Implications for Bitcoin, Cardano, XRP, and other altcoins
Bitcoin (BTC), Cardano (ADA), and Ripple (XRP) have entered a bear market this year, mirroring the broader downturn in equities. The Dow Jones, S&P 500, and Nasdaq 100 indices have all fallen over 20% from their 2024 highs, officially entering bear territory.
History shows that risky assets like stocks and crypto do well whenever the Federal Reserve implements an emergency interest rate cut. A good example happened in March 2020 when the fear and greed index dropped to the extreme fear zone as the pandemic started.
A series of interest rate cuts, quantitative easing, and fiscal stimulus helped to boost crypto and stock prices. Bitcoin soared from below $4,000 in March 2020 to over $69,000 a year later. Similarly, XRP price jumped from $0.12 to almost $2, while Cardano’s meteoric rise pushed it to $3 and its market cap to $91 billion.
Donald Trump has already started talking about fiscal stimulus. According to the Wall Street Journal, the administration is considering a bailout for farmers and a tax credit to help exporters navigate the new normal.
Therefore, a combination of easy money policies by the Fed and more fiscal stimulus would help push Bitcoin, Cardano, and XRP prices higher.
