While bitcoin continues to decline, a signal from the U.S. Federal Reserve briefly reversed sentiment. Within hours, the odds of a rate cut in December nearly doubled, reigniting hopes of monetary support. In a climate of uncertainty, this reversal fuels speculation of a possible rebound. Investors, until now on the defensive, are now watching the Fed as a key factor for crisis exit.
In brief
- •The U.S. Federal Reserve surprised markets by hinting at a possible rate cut as early as December.
- •Within less than 24 hours, the odds of monetary easing jumped from 39.1 % to 69.4 %, according to the CME FedWatch Tool.
- •This development caused an immediate reaction among crypto investors, despite Bitcoin’s persistent fall.
- •A rate cut would enhance the appeal of risky assets, making the Fed’s decision a potential catalyst for cryptos.
Markets Heavily Betting on a Rate Cut in December
On November 15, expectations of monetary easing by the Federal Reserve saw a spectacular increase.
According to data from the CME FedWatch Tool, the probabilities of a rate cut at the next FOMC meeting in December rose from 39.1 % to 69.4 % within 24 hours.
This sudden shift was triggered by statements from the President of the New York Fed, John Williams, who stated that the Fed could “cut rates in the near future without compromising its inflation goal”. Immediately, market observers interpreted these remarks as an accommodating signal, potentially signaling a long-awaited monetary pivot.
Several analysts and market players reacted to this unexpected development, interpreting it as a bullish reading of the Fed’s change of tone. Here are the key points of this sequence:
- •The jump in rate cut odds is one of the most marked in several months: +30.3 points in one day.
- •Joe Weisenthal, an analyst at Bloomberg, noted that it was John Williams’ remarks that massively raised these expectations.
- •Mohamed El-Erian, an influential economist, however warned against excessive optimism, urging markets not to get carried away too quickly.
- •On social media, several crypto figures reacted, like Mister Crypto who reminded that such announcements are usually a bullish signal.
This dynamic illustrates how sensitive the market has become to macroeconomic signals. The mere shift in tone from a Fed official is now enough to reshape expectations, especially in a climate of widespread tension on risky assets, particularly bitcoin.
Bitcoin: Fragile Fundamentals, but Bullish Prospects?
Despite this encouraging signal from the Fed, the crypto market remains deeply marked by a bearish dynamic. Bitcoin’s price stood at 85,071 dollars on Friday, down 10.11 % over the past seven days.
This decline occurs in an environment of extremely degraded market sentiment, as illustrated by the Crypto Fear & Greed Index which showed a score of 11/100, indicative of extreme fear. For analyst Moritz, interviewed via X, this decline does not erase hopes for a reversal. “Let’s see if this will be enough to form a bottom for now”, he commented. However, investors remain divided between cautious optimism and resigned wait-and-see.
On the institutional side, some players believe the market still underestimates the real probability of a rate cut. Coinbase Institutional released a message stating that the chances of a monetary pivot are “mispriced” by markets, based on real-time inflation data, studies on tariff hikes, and indicators from private markets. For them, certain dynamics, such as the disinflationary effects of Trump’s tariffs that disrupted the crypto market, could weigh on growth and justify an anticipated rate cut.
If the Fed confirms this shift towards a softer policy as Goldman Sachs and Citigroup anticipated, the consequences for the crypto market could be major. Generally, a rate cut makes traditional assets like bonds less attractive, pushing investors towards riskier assets, including cryptos.