Fed revives hopes of Bitcoin rebound thanks to December rate cut

As bitcoin continued its declines, a signal from the US Federal Reserve briefly reversed sentiment. In a few hours, the chances of a rate cut in December have almost doubled, bringing back hopes of monetary support. In a climate of uncertainty, this turnaround fuels speculation about a possible rebound. Investors, until now on the defensive, are now scrutinizing the Fed as a key factor in ending the crisis.

Markets are now heavily betting on a rate cut in December

On November 15, expectations of monetary easing by the Federal Reserve increased dramatically.

According to data from the CME FedWatch Tool, the odds of a policy rate cut at the next FOMC meeting in December have increased from 39.1% to 69.4% in 24 hours.

This sudden shift was caused by the statements of the president of the New York Fed, John Williams, who asserted that the Fed could “cut rates in the near future without compromising its inflation target”. Immediately, market observers interpreted these remarks as an accommodating signal, potentially heralding a long-awaited monetary pivot.

Several analysts and market players reacted to this unexpected development, reflecting a bullish reading of the Fed's change of tone. Here is the key elements of this sequence:

• The jump in rate cut probabilities is one of the most marked in several months: +30.3 points in one day;

• Joe Weisenthal, analyst at Bloomberg, pointed out that it was John Williams' comments that massively increased these expectations;

• Mohamed El-Erian, an influential economist, however, warned against excessive optimism, calling on markets not to get carried away too quickly;

• On social networks, several crypto figures reacted, like Mister Crypto who reminds us that this type of announcement is usually a bullish signal.

This dynamic illustrates how sensitive the market has become to macroeconomic signals. The simple slip in the speech of a Fed official is now enough to reconfigure expectations, especially in a climate of generalized tension over risky assets, in particular bitcoin.

Bitcoin: fragile fundamentals, but bullish prospects?

Despite this encouraging signal from the Fed, the crypto market remains deeply marked by a bearish dynamic. The price of bitcoin stood at $85,071 on Friday, down 10.11% over the last seven days.

This decline takes place in a context of extremely degraded market sentiment, as illustrated by the Crypto Fear & Greed Index which displayed a score of 11/100, synonymous with extreme fear. For analyst Moritz, interviewed via X, this drop does not erase hopes of a turnaround. “Let’s see if this will be enough to form a low point for now”he commented. However, investors remain divided between cautious optimism and resigned wait-and-see attitude.

On the institutional side, some players believe that the market still underestimates the real probability of a rate cut. Coinbase Institutional thus published in a message that the chances of a monetary pivot are “poorly priced” by the markets, based on real-time inflation data, studies on tariff increases, and indicators from private markets. For them, certain dynamics, such as the disinflationary effects of customs tariffs which have sowed chaos on the crypto market, could weigh on growth and justify an anticipated rate cut.

If the Fed were to confirm this shift towards a more flexible policy as anticipated by Goldman Sachs and Citigroup, the consequences for the crypto market could be major. In general, a decline in interest rates makes traditional assets like bonds less attractive, pushing investors toward riskier assets, including cryptos.