Bitcoin (BTC) set a new all-time high above $106,000 in early trading on Dec. 16 before retreating to $104,500, as markets brace for a potentially hawkish rate cut from the U.S. Federal Reserve. Concerns loom that the Fed's commentary may temper expectations for further easing, impacting risk assets like Bitcoin.
Fed Rate Cut and Hawkish Projections
The Federal Reserve is expected to announce a 25-basis-point rate cut, reducing the benchmark borrowing range to 4.25%-4.5%. This marks the third rate cut since September, with a cumulative reduction of 100 basis points. However, speculation suggests that the accompanying dot plot—a projection of future rate decisions—could signal fewer or slower cuts in 2024, potentially dampening investor sentiment.
Market watchers anticipate Fed Chair Jerome Powell will acknowledge stronger-than-expected economic resilience and an uneven inflation path during his press conference on Dec. 18 at 14:30 ET. According to Marc Chandler of Bannockburn Global Forex, "A 'hawkish' cut could mean less aggressive easing next year, which might challenge risk assets like Bitcoin."
Seasonal and Macro Support for BTC
Despite potential headwinds, Bitcoin's rally may find support in bullish seasonality and improved regulatory sentiment under President-elect Trump. Additionally, the global central bank easing cycle remains a favorable macro backdrop. Analysts highlight China's expected monetary easing as a significant contributor to global liquidity, bolstering Bitcoin's bull case.
"While concerns about slower rate cuts persist, the macro dynamic of global liquidity expansion keeps BTC's outlook positive," LondonCryptoClub noted.
Upcoming Inflation Data
Later this week, markets will assess the core PCE index, the Fed's preferred inflation measure, which could reveal whether recent inflation upticks are anomalies or signal sustained upward pressure.
For now, Bitcoin’s bull run reflects broader optimism, but the Fed’s upcoming decisions could introduce volatility, testing the strength of BTC’s new record highs, according to CoinDesk.
