December Fed Meeting and Potential Rate Cut: Implications for Bitcoin Price

The Federal Reserve’s Federal Open Market Committee (FOMC) is set to announce its latest monetary policy decision on December 11, 2025 (Beijing time: December 11, 3:00 AM), followed by a press conference hosted by Fed Chair Jerome Powell. This meeting occurs against a backdrop of persistent economic uncertainties: recent government shutdowns have led to the absence of some key economic data, yet market participants and research institutions broadly anticipate that the Fed will lower interest rates by 25 basis points. If realized, this would be the third consecutive rate cut this year.

What Is at Stake?

The December FOMC decision is highly anticipated for several reasons:

1. Extent of Division Within FOMC: Leading up to the blackout period, over half of FOMC members leaned toward keeping rates unchanged. The market will closely watch Chair Powell’s ability to unify the committee and advance a rate cut with minimal dissent—an important indicator of his leadership.

2. Tone of Powell’s Press Conference: Recent signs of a weakening job market (e.g., soft ADP employment data, the Beige Book) suggest that Powell’s comments may tilt dovish, supporting rate cut expectations.

3. Quarterly Economic Projections: If the Fed raises GDP forecasts for 2025-26 while maintaining a projection for just one rate cut in 2026, it could be interpreted as a hawkish signal despite a rate cut in December.

Why Is a Rate Cut Expected?

Bloomberg Economics and key market voices predict this path based on several data points:

• The September PCE report showed slowing consumer spending and moderate inflation in services.

• JOLTS data suggests labor market demand may be softening.

Significantly, White House National Economic Council Director Kevin Hassett publicly stated there is consensus for a "25 basis points" rate reduction, reinforcing market expectations.

The CME FedWatch Tool, reflecting pricing in fed funds futures, projected an 87% probability the Fed would cut its key interest rate to a 3.5–3.75% range at the December meeting. In turn, both Bank of America Global Research and Morgan Stanley have recently revised their forecasts to expect a December rate cut.

How Fed Rates Influence Financial Markets

The Fed is tasked with a dual mandate: price stability (keeping inflation near 2%) and maximum employment. Interest rate adjustments are its core monetary policy tool. By lowering rates, the Fed makes borrowing cheaper, which:

• Encourages investment and spending.

• Reduces returns on traditional fixed-income products.

• Weakens the USD, which can be bullish for dollar-denominated assets like gold and Bitcoin.

• Potentially stimulates higher-risk assets—including cryptocurrencies—as investors seek returns outside the traditional banking sector.

However, a conundrum persists: inflation, though lower, is still above the Fed’s 2% target, while the job market has softened. This puts the Fed at a crossroads over whether to prioritize supporting employment (by cutting rates) or controlling inflation (by holding rates higher for longer).

Potential Impact on Bitcoin

Macro Conditions Favor a Year-End Crypto Rally

Bitcoin (BTC) and the broader crypto market have struggled with volatility in Q4 2025, but momentum may shift with the upcoming Fed decision. Institutional analysts—including Coinbase—have flagged the prospect of a "Santa rally," in which Bitcoin rallies into the year-end. Core drivers include:

• Improving global liquidity and rising odds of Fed rate cuts (up to 92% as per December 4 data).

• A more dovish policy outlook that can embolden both institutional and retail inflows into crypto assets.

• Technical positives—such as the successful retest of the $80,000 region and increased ETF activity (e.g., Vanguard allowing ETF trading).

Some Institutions observed, “Crypto could be poised for a December recovery as liquidity improves, Fed cut odds jump, and macro tailwinds build.”

Source: Coimarketcap

Key Risks: Hawkish Messaging

Risk remains that, even with a rate cut, any hawkish commentary from Chair Powell—such as signaling a pause in future cuts or reducing the pace of the Fed’s quantitative easing—could limit the upside for Bitcoin. Market participants will scrutinize the language and tone of Powell’s press conference as much as the rate decision itself.

Nic Puckrin, Coin Bureau co-founder, noted:

"If the Fed cuts rates on December 10th, along with ending QT, there's little standing in the way of a Santa rally for Bitcoin—bar any major geopolitical bombshell. However, investors will scrutinize Jerome Powell’s every word during the press conference to get a glimpse into 2026 monetary policy, and any hawkishness could put a lid on the rally."

Macro and Technical Drivers for Bitcoin

• Inflows into Bitcoin ETFs, should risk appetite improve, could further support price recovery.

• The possibility of Kevin Hassett—considered dovish—being appointed as the next Fed Chair in early 2026 raises the likelihood of a more accommodative monetary stance.

• Continued uncertainty over U.S. economic releases, due to the government shutdown, adds volatility and keeps investors alert.

Crypto Market Sentiment

Despite positive macro factors, investor sentiment remains cautious, with many market participants waiting for clear signals before deploying new capital. Should the Fed deliver a dovish surprise or signal accelerating cuts into 2026, cryptocurrencies like Bitcoin could benefit from renewed speculative inflows.

Key Takeaways for Investors

• If the Fed Cuts Rates: Bitcoin and risk assets may see a relief rally as dollar liquidity improves and speculative risk appetite returns.

• If Cut Is Dovish/Hawkish: The tone of the post-meeting guidance is critical. Any hawkish overtones could cap Bitcoin’s upside despite a cut.

• Long-Term Outlook: Future appointments (e.g., Kevin Hassett for Fed Chair) and the broader inflation trajectory will influence the Fed’s future path and, in turn, the outlook for Bitcoin and other cryptocurrencies.

Conclusion

The December 2025 FOMC meeting will be a pivotal moment for global markets and particularly for Bitcoin. The probability of a rate cut is high, but investor reaction will depend on both the decision and the forward guidance issued by Chair Powell and the committee. Crypto investors should monitor the outcome closely, as policy shifts can trigger both opportunities and volatility in the months ahead.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.