The US Federal Reserve reduced its interest rates by 25 basis points on Wednesday, a decision widely anticipated by investors. But will this drop be enough to propel Bitcoin to new highs, as divisions within the FOMC cloud the outlook for December?
In brief
- The FOMC cut rates by 25 basis points, bringing the federal funds rate to between 3.75% and 4%.
- This decision was already integrated into crypto prices according to market analysts.
- Bitcoin fell 2.4% following Jerome Powell's comments on the Fed's internal divisions.
- More than 56% of market participants anticipate a further decline in December despite the uncertainty.
The crypto market had already priced in the Fed’s rate cut
The Federal Reserve's Monetary Policy Committee announced on Wednesday October 29 a 25 basis point reduction in its key rates. This decision brings the target federal funds rate to a range of 3.75% to 4%.
For Matt Mena, analyst at 21Shares, this decline was “fully anticipated” by investors who had already integrated it into their strategies.
The analyst, however, remains optimistic for bitcoin. “ Historically, November has been one of the best performing months for bitcoin, with positive returns in 8 of the last 12 years, for an average of 46.02%. »he emphasizes.
He believes that the flagship crypto has “a strong chance of breaking its all-time high before the end of the year”.
However, the market reaction was not as expected. Bitcoin fell around 2.4% after Jerome Powell's statements. The Fed chairman revealed dissension within the committee over a possible December cut. This revelation dampened investor enthusiasm.
“ Unexpectedly hawkish stance from regional Fed chair underscores future decisions will be increasingly controversial », Analyzes Michael Pearce, deputy chief economist at Oxford Economics.
This growing division within the institution could limit the flow of liquidity into digital assets and curb the rise of cryptos.
Uncertainties weigh on the end-of-year outlook
THE data from the Chicago Mercantile Exchange reveal that 56% of market participants expect another rate cut in December, with a target range between 3.5% and 3.75%.
This anticipation comes after the start of the downward cycle initiated in September, which helped propel bitcoin beyond $125,000.
Several banking giants like Bank of America, Citigroup and Goldman Sachs are planning at least two additional cuts in 2025. These reductions should normally support the prices of risky assets, including cryptocurrencies. But the equation is not that simple.
Trade tensions between China and the United States introduce a major uncertainty variable. The planned meeting between Donald Trump and Xi Jinping could change the situation.
A trade deal would calm markets and favor digital assets. Conversely, an escalation of tensions would counteract the beneficial effects of accommodative monetary policy.
At the same time, the Federal Reserve is increasing its signals of openness towards the crypto ecosystem. On October 21, it organized a historic conference on payments innovation in Washington, explicitly mentioning cryptos. Sergey Nazarov of Chainlink, the bosses of Circle, Paxos and Coinbase debated alongside BlackRock and JPMorgan. A strong signal of legitimization.
This institutional recognition does not, however, guarantee a triumphant rally if the macroeconomic context deteriorates. The end of the year will depend as much on the Fed's decisions as on geopolitical developments.
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