Polymarket sees $1.4 million bet on federal interest rate cut after market crash

The decentralized prediction platform Polymarket has a nearly $1.44 million bet that the Federal Reserve will cut interest rates by September 2024.

The wager joins other predictions as Polymarket users bet on how the Federal Reserve will act during the broader market downturn.

The $1.44 million bet is part of a wager that now estimates a 58% chance that the Federal Reserve will cut interest rates by over 50 basis points (bps), the unit of measurement for financial percentages. There is also an estimated 40% chance that the rate will decrease by 25 bps. Users placed a $687,343 bet and a $313,224 bet on the first and second predictions, respectively. 

In the regulated futures markets, as of publication time, traders are estimating an 83.5% probability that the Fed would cut the rate by 50 bps in September and a 16.5% probability that it would cut 25 bps, according to the CME's FedWatch tool. 

"This market will resolve to 'Yes' if following the Federal Reserve's September 2024 meeting the upper bound of the target federal funds rate is decreased by 50 or more basis points below the level it was prior to the meeting," according to the prediction. "Otherwise, it will resolve to 'No,'

Another prediction deals with whether the Federal Reserve will hold an emergency rate cut in 2024. However, users estimated a 25% chance of this happening, placing a $58,675 bet on it.

The federal funds rate, which is what banks charge each other for overnight loans using funds at a Federal Reserve bank, sits between 5.25% and 5.5%. Financial experts such as a WisdomTree's Senior Economist and The deVere Group's CEO noted that the Federal Reserve should lower interest rates to avoid a potential recession, The Block previously reported.  

Polymarket's performance

Polymarket brought in its all-time high trading volume with $387.01 million in July, The Block's Data Dashboard shows. Additionally, Polymarket saw its record-high number of users at around 44,520 traders. 

Predictions regarding United States political events largely contributed to driving Polymarket's cumulative volume above $1 billion in early August, The Block previously reported.