As the Federal Reserve”s December meeting approaches, the cryptocurrency market is keenly anticipating a possible interest rate cut. Current market sentiment shows that traders on Polymarket are nearly convinced that the Federal Reserve will enact a reduction of 25 basis points. Just a fortnight ago, opinions were divided on whether the Fed would take action, but recent developments and comments from Fed officials have significantly tilted expectations towards a rate cut.
Before November 20, following a previous 25 basis point cut, Fed Chair Jerome Powell described the decision for December as “an open question.” Many had speculated that the Fed might opt for a pause. However, revised labor market data released recently painted a different picture: while 119,000 jobs were added, the unemployment rate climbed to 4.4%, and previous months” job figures were downgraded, indicating a slowing labor market that experts have termed “stall speed.”
Market expectations surged after remarks from Fed Governor Christopher Waller on November 24, who stated, “there are no signs of a recovery,” suggesting he is in favor of a December cut. Other Fed officials, including Mary Daly and John Williams, echoed this sentiment, indicating that high rates should not be maintained longer than necessary, particularly in light of the delayed data. As a result, Polymarket”s pricing for a rate cut jumped from 65 cents to 84 cents in just one day.
Despite this momentum, there remains a 12% chance that the Fed will choose to keep rates unchanged. Strong economic indicators, such as an increase in job growth or rising wages reported on Friday, could swiftly alter these expectations. Powell”s careful communication strategy indicates he is mindful of managing market reactions without inciting panic.
Political figures, including President Trump, have also been vocal about the need for more significant rate cuts, although the Fed usually maintains a distance from political pressures. As the Fed”s interest rate decision looms, the financial markets are closely monitoring developments. The December meeting is set to be pivotal, with economic data, Fed guidance, and market responses all influencing future expectations.
In the cryptocurrency realm, Bitcoin is currently in a waiting phase, with the market closely observing the Fed”s actions. The price of BTC has diverged from the M2 money supply and is likely to stabilize between $90,000 and $120,000 until the Fed resumes injecting liquidity in the upcoming year. Should the Fed refrain from cutting rates in December, Bitcoin could remain confined within the $60,000 to $80,000 range as the year comes to a close. Notably, stablecoin reserves on exchanges have reached new highs, suggesting that liquidity is poised for future rallies. However, Bitcoin”s monthly close below the 10-month moving average for the first time in 46 months serves as a bearish signal. The forthcoming FOMC meeting on December 9-10 has the potential to either catalyze a substantial market reversal or perpetuate the current stagnation, influencing the broader cryptocurrency landscape.
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