Bitcoin and the broader cryptocurrency market are navigating a challenging period. However, IG’s Chief Market Analyst, Chris Beauchamp, believes a turnaround might be on the horizon.
Following months of selling pressure and declining confidence, Beauchamp anticipates a rebound this week. This expectation is driven by traders positioning themselves ahead of an anticipated Federal Reserve interest rate cut.
IG's Beauchamp Foresees Bitcoin Recovery Following Rate Cut
Bitcoin's recent struggles began shortly after it reached a new all-time high of $126,272 in October. The rally faltered, leading to consistent declines. Bitcoin concluded October with a 3.95% loss and is currently trading around $90,211.
This downward trend intensified in November, with Bitcoin dropping another 17.5%. This marked its worst monthly performance since February 2025, impacting the entire cryptocurrency market. The global crypto market value has fallen from its October peak of $4.27 trillion to $3.08 trillion, representing a loss of $1.19 trillion in just two months.
Despite these significant losses, Beauchamp suggests that stabilization could be near. He specifically highlighted the upcoming Federal Open Market Committee meeting, scheduled for December 9-10, which represents the Federal Reserve's final policy decision of 2025.
December Rate Cut Appears Highly Probable
The market widely expects the Federal Reserve to implement another rate cut. The central bank has already reduced rates by 25 basis points in both September and October, bringing the target range to 3.75%-4.00%. An additional quarter-point cut this week would lower the range to 3.50%-3.75%.
Market indicators strongly support this action. The CME FedWatch Tool indicates an 89.5% probability of a December cut, a significant increase from 30% in November. Futures markets also reflect an 86% likelihood of this outcome.
Economists share a similar outlook. A recent Reuters poll of 108 economists revealed that 89 anticipate the Fed will cut rates again, citing a cooling labor market. Major financial firms have echoed these forecasts.
T. Rowe Price predicts that rates could fall to 3% or lower next year as labor conditions continue to soften. Morgan Stanley has revised its earlier stance, now expecting a 25-basis-point cut in December, acknowledging their previous assessment was premature.
JPMorgan anticipates rate cuts in both December and January, while Bank of America expects a December reduction followed by two more in 2026. Berenberg suggests that the recent rise in unemployment has likely influenced Fed officials toward easing monetary policy.
Lower Interest Rates Drive Liquidity
Given these probabilities, Beauchamp argues that lower interest rates typically stimulate interest in risk assets. This is particularly true after significant market pullbacks create more attractive entry points for investors.
He observed that both Bitcoin and Ethereum attracted buyers during their recent weekend dips, suggesting that the market may be forming a short-term bottom. Beauchamp believes a December rate cut could effectively restore momentum following the sharp reversal that occurred after Bitcoin's record-breaking surge in October.
However, the Federal Reserve faces internal divisions leading up to the meeting. Minutes from the October meeting revealed a significant split among policymakers. Notably, several members expressed reservations about further rate cuts, with up to five voting officials still opposing additional easing.
Fed Chair Jerome Powell is navigating a delicate balance between these internal concerns and external economic challenges. He recently commented that limited data from the temporary government shutdown made October a difficult period for decision-making, likening the situation to driving through fog.
Currently, inflation remains above the Federal Reserve's 2% target and has persisted at this level since March 2021. Economists project that the Personal Consumption Expenditures index will stay above the target through 2027.