As the Federal Open Market Committee (FOMC) begins its December meeting, markets are keenly observing the anticipated interest rate cut and its potential influence on cryptocurrency market volatility.
The FOMC will convene from December 9th to December 10th, 2025, to review current U.S. economic data and formulate monetary policy. This final meeting of the year has garnered substantial attention from investors.
Key areas of focus will include the federal funds rate decision, updated economic projections, and insights from Chair Jerome Powell’s press conference. These elements will provide guidance on inflation, labor market conditions, and the trajectory of monetary policy into the upcoming year.
Anticipated Rate Cut and Economic Forecasts
Current market projections indicate a high probability, ranging from 80% to 92%, of a 25-basis-point reduction in the federal funds rate. This would adjust the target range to 3.50%–3.75%, marking the third consecutive decrease this year. While a pause or an unexpected increase is considered unlikely, any deviation from these expectations could trigger rapid market fluctuations.
Alongside the rate decision, the Federal Reserve is set to release its Summary of Economic Projections, which includes the widely scrutinized dot plot. Analysts anticipate projections for gross domestic product growth around 2.1%, an unemployment rate near 4.2%, and core inflation approximately at 2.5%.
The dot plot is expected to offer a glimpse into policymakers' outlook for 2026, with a consensus suggesting three to four additional rate cuts. Further details regarding the Fed's economic outlook and the potential slowdown of quantitative tightening are anticipated from Powell's press conference scheduled for December 10th at 2:30 p.m. ET.
Potential Crypto Market Reactions to the FOMC Meeting
Cryptocurrency markets, known for their sensitivity to shifts in U.S. monetary policy, are bracing for heightened volatility. Over $1 billion in open positions could face liquidation depending on the guidance provided by the Federal Reserve.
Bitcoin is currently trading within the $90,500–$91,500 range, while Ethereum is priced around $3,100. A confirmed 25-basis-point rate cut, coupled with a dovish dot plot indicating multiple reductions in 2026, would likely boost market liquidity.
Under such circumstances, Bitcoin could see an increase to the $92,000–$95,000 range. This could trigger short liquidation cascades exceeding $120 million, further amplifying volatility.
Conversely, a "hawkish cut" or an unexpected pause in rate reductions might lead to profit-taking and a broader risk-off sentiment. This scenario could push Bitcoin towards the $88,000–$89,000 level and place downward pressure on altcoins, with Ethereum potentially falling below $3,000.
The market sentiment remains cautiously optimistic. Despite increased anxiety among retail traders, institutional investors continue to accumulate assets. This suggests that if monetary policy aligns with dovish expectations, any dips in price could present attractive buying opportunities.