Officials hinted at a Federal Reserve rate cut during Monday’s monetary policy meeting, which could drive Bitcoin prices above $100,000.
Bitcoin prices face strong resistance at the $100,000 level, as cryptocurrency investors eagerly await the Federal Reserve's rate cut in December to drive the rally. According to the CME FedWatch tool, the probability of a rate cut at the upcoming FOMC meeting on December 18 has surged to 72.5%. Market analysts predict a 25 basis point rate cut at the forthcoming meeting.
Will a Federal Reserve rate cut boost optimism in the cryptocurrency market?
Cryptocurrency market investors are eagerly anticipating a 25 basis point rate cut from the Federal Reserve, bringing the target rate to between 4.25% and 4.5%. The U.S. central bank currently maintains the rate in the target range of 4.5% to 4.75%, having cut rates twice this year for a total reduction of 0.75%, bringing rates down from a 20-year high.
Federal Reserve rate cuts are generally favorable for Bitcoin and the entire cryptocurrency market, as they inject new liquidity into the market. BTC prices have faced multiple rejections at the $100,000 mark and are currently hovering around $96,000. Chris Newhouse, research director at Cumberland Labs, stated:
"While we see strong institutional buying pressure, particularly from entities like MicroStrategy that continue to accumulate strategically, the broader crypto ecosystem is experiencing a diversification of capital flows from both institutional and non-institutional participants."
A positive development is that inflows into spot Bitcoin ETFs have rebounded. On Monday, total inflows remained at $353 million, with BlackRock's IBIT contributing $338.3 million. Several traditional BlackRock funds have also invested in IBIT over the past few months.
On Monday, December 2nd, Federal Reserve Governor Waller hinted at a possible rate cut this month, stating during the monetary policy meeting yesterday, 'At this point, I am inclined to support a rate cut,' which further increased the likelihood of monetary easing.
At yesterday's meeting, New York Federal Reserve Bank President John Williams spoke at the Queens Chamber of Commerce, stating that he expects rates to 'decline over time.' However, he did not specify whether he would support a rate cut at the upcoming meeting. According to the FedWatch tool from the Chicago Mercantile Exchange, the probability of a rate cut rose by 8 percentage points after his comments.
Capital flow shift from Bitcoin to altcoins
As Bitcoin prices enter a strong consolidation phase, attention is shifting to altcoins like Ethereum, XRP, and Cardano, which have underperformed relative to BTC since President Trump’s victory. The price surge of XRP has extended to $2.73, with on-chain indicators showing strong optimism among investors.
Demand for downside protection on Bitcoin options expiring in December is increasing in the crypto options market. Meanwhile, Bitcoin futures are exhibiting moderate leverage, remaining subdued after digital assets peaked at $99,000. Vetle Lunde, research director at digital asset research firm K33, stated:
"On-chain data shows that the mid-term group (traders with buying volumes in the range of 55k-70k) are actively realizing profits, while profit-taking is particularly intense when BTC trading prices exceed 90k."
Furthermore, as Donald Trump assumes the presidency of the United States next month, investors remain optimistic about the upcoming cryptocurrency legislation. Trump has begun appointing legislators who support cryptocurrencies to his team, reportedly working to secure the White House's 'cryptocurrency czar' position.
