The US Federal Reserve (Fed) is expected to announce its interest rate decision at 3 a.m. tomorrow. The market generally predicts that the Fed will cut interest rates by one basis point again in December. According to data from the CME Fed Watch tool, the market expects the probability of a one basis point rate cut in December to be as high as 95.4%, while the probability of keeping the interest rate unchanged is only 2%.
This means that the Federal Reserve will cut interest rates for the third time in a row since it began cutting interest rates in September, with a cumulative cut of 1 percentage point, and the interest rate range will drop to 4.25% to 4.50%.
However, traders currently expect the Fed to hold off on cutting interest rates starting in January next year, with a probability of nearly 80% to maintain interest rates in the range of 4.25% to 4.50%. The probability of another cut is only 16.3%. If this is true, it may not be good news for market liquidity.
Traders are currently in a wait-and-see mode, waiting for the Federal Reserve's interest rate cut decision.
After Bitcoin broke through the historical high of $108,000 last night, it began to correct, possibly because traders are waiting for the Federal Reserve's interest rate cut while also assessing the optimism brought by Trump's official election result through the Electoral College vote and his support for cryptocurrencies.
Bitcoin touched $108,365 on Tuesday night but has fallen back to $103,600 by noon today, a decline of nearly 4.4%. As of the time of writing, the price is $103,933, with the increase over the past 24 hours narrowing to about 2.4%.
Before the election, Trump proposed a series of crypto-friendly policies, such as creating a friendly regulatory environment, leading the U.S. in the cryptocurrency industry, and even supporting the establishment of a national strategic reserve for Bitcoin. These initiatives have driven Bitcoin to rise more than 59% from around $68,000 at the time of the election due to the 'Trump effect'. This has also caused the stock price of the largest Bitcoin-holding company in the U.S.—MicroStrategy—to soar, and it is about to be included in the Nasdaq 100 index, creating a wave of fervent optimism in the entire crypto market.
Although the market generally expects the Federal Reserve to announce another 25 basis point rate cut tomorrow, the strong growth of the U.S. economy, along with potential inflation risks from Trump's tax and immigration policies, keeps the outlook for the Federal Reserve's policy uncertain.
Will Bitcoin continue to rise after the Federal Reserve cuts rates?
Analysts Vetle Lunde and David Zimmerman from K33 Research pointed out in their report: 'We expect this week's Federal Open Market Committee (FOMC) meeting will intensify market volatility. After the meeting, the overall economic situation may stabilize for a few weeks, which could provide more momentum for Bitcoin during the Christmas holiday period.'
Additionally, 0x Research believes that, according to trading model analysis, Bitcoin could surge to $120,000 by January 20, 2025, when Trump officially takes office, with an estimated probability of 83.33%.
However, some analysts remind that chasing Bitcoin at the current price levels requires caution. Some anonymous experts have also indicated to Dongqu Analysis that the current price of BTC may have already 'priced in' the expectation of an interest rate cut, meaning the market has reacted in advance to the possibility of a rate cut, so the current optimistic sentiment is already reflected in the price. If the Federal Reserve cuts rates as expected, there may be a situation where 'good news is priced in,' leading to a slight correction in Bitcoin's price.
In addition, there is a very slight possibility that the Federal Reserve may announce a slowdown in the pace of rate cuts, and some officials have even mentioned the possibility of raising rates to combat inflation. However, this view is in the minority and is unlikely to dominate the vote. If a scenario of not cutting rates does occur, it could lead to a significant market correction.
