Bitcoin (BTC) and U.S. stocks were trending upwards in early Tuesday trading as Wall Street's expectation for a 50 basis point interest rate cut by the Federal Reserve currently stands at 63%.

Over the past week, the magnitude of the rate cut has been a hotly debated topic, as data has been somewhat mixed but clearly indicates that inflation continues to moderate towards the Federal Reserve's 2% target, while U.S. consumers have shown resilience despite higher living costs.

Trade Nation Senior Market Analyst David Morrison stated: "Investors are on edge due to the sudden change in expectations for the magnitude of the rate cut tomorrow."

"Last Wednesday, after a relatively tame CPI update, the possibility of a 25 basis point cut was at 87%.

However, remarks from former New York Fed Chairman Bill Dudley led to a significant and unexpected shift in expectations, as he expressed support for a more substantial rate cut.

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The FedWatch tool at the Chicago Mercantile Exchange currently considers the probability of a 50 basis point cut to be [63%], while the likelihood of a smaller cut has fallen to [37%]."

He pointed out: "Such high uncertainty ahead of a Federal Reserve meeting is extremely rare."

"Typically, odds favorable to a specific outcome are seen in the mid-90s.

This implies that there could be considerable volatility following the announcement, which could be exacerbated by the simultaneous release of the Federal Open Market Committee's quarterly economic projections summary, including the 'dot plot.'

This shows individual Federal Open Market Committee members' forecasts for the federal funds rate for the remainder of this year and beyond."

Morrison warned: "Given that investors are currently predicting cuts of up to 125 basis points this year, while the Fed's funds target is a 3% reduction by the end of 2025, the dot plot may indicate a significant gap between investor expectations and the Federal Open Market Committee."

"If so, Federal Reserve Chairman Jerome Powell will have to be at his best in the subsequent press conference to quell any turmoil."

Although the size of the rate cut is uncertain, the fact that Wall Street considers the likelihood of a rate cut to be 100% has helped to boost risk assets, including Bitcoin, which rose above $60,000 as bulls sought to recover ground lost since Sunday.

Concerns about a possible 50 basis point rate cut have led some analysts to worry that the Fed sees something worrisome in the economy, and they are trying to exit ahead of time without scaring investors, prompting some to take a closer look at the role of Bitcoin and gold as wealth protectors during economic downturns.

Deenar Gold-backed Stablecoin Project Co-founder Maruf Yusupov stated: "Current macroeconomic trends have highlighted significant differences between Bitcoin and gold."

"Although Bitcoin fell to $57,578.35 amid sharp volatility, gold prices have remained in positive growth, reaching $2,579.21."

He noted: "The reasons for Bitcoin's trend are not far-fetched and hinge on the uncertainty of a potential rate cut by the Fed."

"While this rate cut has a potentially positive outlook for the overall market, investors remain cautious about pervasive uncertainty."

Yusupov stated: "The price and valuation trends of Bitcoin and gold over the past month indicate that the correlation between the two assets has widened."

"Although Bitcoin has fallen by more than 3% over the past month, down more than 21% from its all-time high of $73,750.07, gold has risen over the past month.

This precious metal even retested a new ATH of $2,589 last month, with its value increasing by more than 3% over the past 30 days."

He added: "Another major trend between these two assets over the past month is the plummeting of their main ETF products."

"Amid signs of economic turmoil, investors are mostly betting on capital protection.

Gold's limited volatility makes it an attractive alternative for hedging potential uncertainty."

Yusupov stated: "This shift has recently led to a dense capital outflow from Bitcoin ETF products, with BlackRock unexpectedly joining the outflow trend."

"Other risks of crypto assets have not been immune to this capital outflow.

Although it is premature to claim that traditional investors are turning to gold, market data generally supports this theory."

He concluded: "Currently, these two assets have decoupled, further strengthening the decoupling that the two assets have shown over the past few weeks."

Currently, Bitcoin is trading at $61,278, up 5.9% on the 24-hour chart.