Bitcoin traders are building leveraged positions across the crypto derivatives market ahead of a pivotal Federal Reserve meeting this week, as markets anticipate further cuts this year.

The U.S. Federal Reserve’s interest rate decision on Wednesday has become a focal point for investors, who are widely expecting a quarter-point cut that could bolster appetite for risk assets, including crypto.

The sentiment stems from a confluence of recent economic developments, including worsening labor market as seen in July and August reports and a decline in core inflation, both of which prompted the central bank’s initial cut last month.

The ongoing U.S. government shutdown has since created a data vacuum, limiting the Fed’s visibility into the economy. Still, Fed Chair Jerome Powell’s recent comments on ending quantitative tightening have provided some clues into the central bank’s thinking.

The expectation of another cut is reflected in the prediction market Myriad, owned by Decrypt’s parent company Dastan, where users have assigned a 92.6% chance of a quarter-point rate cut this week.

Optimism over the policy shift is already fueling activity in crypto markets, where Bitcoin’s aggregated open interest—representing the total value of all open derivatives positions—has surged to $ 37.63 billion, according to CryptoQuant data. 

The top crypto’s rally from $107,600 last week to just above $116,000 has been backed by an uptick in open interest, from $33 billion, a sign that investors are positioning ahead of this week’s event.

It’s worth noting that open interest remains below the October 6 level of $47 billion, a time when Bitcoin set a record high of $126,080, according to CoinGecko data. That comes amid the conviction that further upside may already be priced in, according to some.

“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,” Gracy Chen, CEO at Bitget, told Decrypt. “Despite the ongoing U.S. government shutdown adding fiscal uncertainty, the Fed’s decision should proceed as planned, as monetary policy operates independently of Congress.”

Chen added that Powell is likely to signal a gradual easing cycle —a combination that points to broader liquidity expansion, supportive of risk assets.

“Bitcoin’s rebound…over the weekend reflects this improving sentiment, with strong ETF inflows and easing trade tensions fueling momentum,” Chen said. “If Bitcoin holds above $112,000, it could push toward $118,000 to $120,000 by month’s end, while rising open interest near $40 billion suggests renewed trader confidence.

Still, “leverage-driven volatility remains a risk,” the analyst noted.