How Will Crypto Markets React If the Fed Holds Rates or Cuts Them?

Core Viewpoint - The Federal Open Market Committee (FOMC) is expected to announce a rate cut during its December 2025 session, which could significantly impact crypto markets [1][2]. Group 1: Rate Cut Expectations - Market expectations are heavily leaning towards a 25-basis-point rate cut, with an 89.4% probability assigned to this outcome for the December 10 meeting [2]. - If the Fed implements a cut, it would mark the third consecutive reduction this year, lowering the interest rate to a range of 3.50%-3.75% [3]. Group 2: Market Reactions - The September rate cut led to a brief increase in the crypto market, with Bitcoin and Ethereum experiencing gains, while the US dollar weakened [3]. - The impact of the October cut was muted due to a broader market downturn, but analysts suggest that another cut could be perceived as bullish for crypto assets [4]. Group 3: Analyst Insights - A standard rate cut is seen as mildly bullish for cryptocurrencies, as it enhances liquidity and encourages investment in risk assets like Bitcoin and Ethereum [5]. - The actual market reaction may be more influenced by Fed Chair Powell's press conference rather than the rate cut announcement itself [5]. Group 4: Future Projections - Bank of America anticipates that Powell may indicate 'reserve management purchases' to inject fresh liquidity, which could stabilize small-bank funding stress and support market liquidity [6]. - A dovish tone from Powell regarding inflation and labor conditions could lead markets to expect further rate cuts, while a hawkish stance could negatively impact Bitcoin and altcoins [6].