Fed interest rate cut imminent: Bitcoin open contracts nearing $40 billion, aiming for $120,000.

Ahead of the Fed's key interest rate decision this week, traders in the Bitcoin derivatives market are massively building leveraged positions, with the total value of open contracts skyrocketing to $37.63 billion, nearing the $40 billion mark. Users of the prediction market Myriad have given a high probability of 92.6%, betting on a 25 basis point rate cut this week. The market's optimistic sentiment stems from the deterioration of the labor market and a decline in core inflation. Analysts predict that if BTC holds above $112,000, the price could surge to between $118,000 and $120,000 by the end of the month. However, experts warn that leverage-driven fluctuations remain a major risk facing the market.

Fed interest rate decision becomes the focus: rate cut expectations drive BTC sentiment

This week, the interest rate decision to be made by the Federal Reserve (The Fed) has become the focus of global investors. The market generally expects the Fed to lower the interest rate by another 25 basis points, a move that is expected to boost the investment willingness in risk assets, including Bitcoin (BTC).

This optimistic sentiment is not unfounded; it is based on a series of economic indicators, including the deterioration reports of the labor market in July and August, as well as the decline in core inflation. This data had previously prompted the Fed to cut interest rates for the first time last month. Although the ongoing U.S. government shutdown has created a data vacuum, limiting the Fed's visibility into the economy, Fed Chairman Jerome Powell's recent comments about ending quantitative tightening (QT) have still provided the market with clues about a policy shift.

( Derivation market frenzy: open interest approaches historical high.

The strong expectation of another interest rate cut is directly reflected in the activity of the crypto derivation market:

• High probability forecast: Users of the prediction market Myriad are betting that the interest rate will be cut by 25 basis points this week with a probability of 92.6%.
• OI Surge: According to CryptoQuant data, the total Open Interest (OI) of Bitcoin )——which represents the total value of all open derivation positions——has soared to $37.63 billion.
• Price increase supported: BTC price rebounded from $107,600 last week to above $116,000, accompanied by OI rising from ( billion, clearly indicating that traders are actively leveraging positions for this week's events.

Despite OI approaching ) billion, it is still below the record ### billion set on October 6, when the Bitcoin price also reached a historic high of $126,080. This indicates that some market views believe that the bullish factors may have been largely digested.

( Expert Interpretation: Policy Signals and Risk Warnings

Industry insiders commented: “The market generally expects that the upcoming FOMC meeting will cut interest rates by 25 basis points, bringing the rate down to 4.00%–4.25%. This move has already been priced in by the market.” She added that monetary policy operates independently of Congress, and the Fed's decisions will proceed as planned.

It is expected that Powell may signal a gradual easing cycle, and this combination points to a broader liquidity expansion, supporting risk assets, and further analysis:

“The rebound of Bitcoin… reflects the continuously improving sentiment, with strong ETF inflows and the easing of trade tensions also boosting this momentum. If Bitcoin can hold above $112,000, it may push towards $118,000 to $120,000 by the end of this month, while approaching ) billion in OI indicates a resurgence of trader confidence.”

However, the analyst also emphasized an important risk: “Leverage-driven volatility remains a risk.” The currently high OI indicates that there are a large number of leveraged positions in the market, which could trigger severe price fluctuations and liquidations if market sentiment or policy signals change unexpectedly.

Conclusion

With the unprecedented confidence in the Fed's interest rate cuts, the surge in Bitcoin’s open contracts clearly reflects that traders are boldly betting on the positive impact of macro liquidity expansion on risk assets. Although a 92.6% probability of rate cuts seems to be a foregone conclusion, the high leverage levels have brought a double-edged sword effect to the market. If the Fed's wording falls short of expectations or if there are any unexpected macroeconomic changes, such a high OI could trigger large-scale chain liquidations, leading to severe fluctuations. For crypto investors, the current focus should be on whether BTC can effectively break through and stabilize above the technical resistance level of $116,000, while maintaining a high vigilance against high leverage risks.