TL;DR
- Fed Cut: Analysts widely expect Powell to deliver a 0.25% rate cut, a move seen as reducing the relative risk of digital assets compared to US Treasuries.
- Market Setup: Bitcoin is trading above $92,000 after a 12% rally from November lows, with $152 million in ETF inflows showing investor confidence.
- Bullish Signal: A volatility spike highlighted by CF Benchmarks suggests exhaustion in recent drawdowns. Historical data shows short-term rallies above $100,000 and longer-term gains averaging +140%.
Today’s Federal Reserve meeting is shaping up as a pivotal moment for Bitcoin traders, with analysts predicting that a 0.25% interest rate cut by Chair Jerome Powell could ignite a powerful rally heading into the new year. Market watchers argue that easing monetary policy will provide crypto investors with breathing room, reinforcing Bitcoin’s role as a risk-on asset poised for significant gains.
Fed Rate Cut Expectations Drive Optimism
The CME FedWatch tool shows an 88% probability of a quarter-point cut, while Polymarket bettors are even more confident at 97%. Andrew Forson, president of DeFi Technologies, said digital assets stand to benefit directly: “Any rate cut reduces the riskiness of digital assets in relation to US Treasuries.” His view reflects broader optimism that Powell will push through the final cut of 2025 despite dissent from inflation-conscious policymakers.
Signals from Fed Officials
Hints of easing have come from several top officials, including Governor Christopher Waller, New York Fed President John Williams, and San Francisco Fed President Mary Daly. Their remarks suggest Powell has the backing needed to deliver policy relief. Lower rates typically boost appetite for risk assets like crypto and tech stocks by reducing yields on safe-haven bonds, making Bitcoin more attractive in relative terms.
Market Context and ETF Inflows
The Fed’s decision arrives as the crypto market remains $1 trillion below its October peak. Bitcoin has already rallied 12% from November lows, hovering above $92,000. Exchange-traded funds added $152 million in inflows on Tuesday, according to DefiLlama, underscoring investor confidence. Broader equity markets, however, stayed cautious, with US stocks flat ahead of the Fed’s announcement. Nvidia shares were unchanged despite President Donald Trump approving a 25% surcharge on H200 chip exports to China.
Technical Signals Point to $220K
Mark Pilipczuk, research analyst at CF Benchmarks, highlighted a “volatility spike” in Bitcoin that historically signals exhaustion in drawdowns. He noted that short-term performance after such signals is generally bullish, with historic return patterns pointing to prices above $100,000 in early 2026. Longer-term data is even stronger: every 12-month outcome following similar signals has been positive, averaging gains of +140%. That trajectory implies Bitcoin could reach $220,000.
