Definition ∞ Rate cut probability represents the market’s assessment of how likely a central bank is to reduce its benchmark interest rate. This probability is typically derived from financial derivatives markets, such as fed funds futures. It serves as an indicator of future monetary policy direction.
Context ∞ News regarding rate cut probability significantly influences investor sentiment and capital flows within digital asset markets. A higher probability of rate cuts often signals looser monetary policy, which can encourage investment in riskier assets, including cryptocurrencies. This dynamic increases liquidity and reduces the cost of borrowing, impacting overall market valuations and investor behavior in the crypto economy.
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