Expectations for interest rate cuts are rising, Bitcoin climbs towards the 94,000 range
The crypto market faces a crucial moment this week, as the Federal Reserve will announce its rate decision on Wednesday. The market bets on a further 25 basis point cut this time, with CME FedWatch data showing a 87.3% probability of a rate cut.
The probability of a rate cut by the Federal Reserve is as high as 87.3%. CME FedWatch
Driven by this, Bitcoin ($BTC) rose above $92,000 during the Asian session on Monday, approaching last week's high of 94,200. Analysts believe that if Bitcoin can effectively break through the 94,000 resistance zone, it is expected to challenge higher resistance levels such as 101,000 and 104,000, but the premise is that the guidance after the FOMC meeting cannot be hawkish.
From a technical perspective, Bitcoin fluctuated between 84,000 and 94,000 last week, forming a doji on the weekly chart, indicating a tug-of-war between bulls and bears. Short-term support lies at 87,200 and 84,000; if the latter is tested again, its support effectiveness will be significantly weakened. Stronger support ranges are at 72,000 to 68,000, extending to the key Fibonacci retracement level of 57,700. Although short-term momentum is bullish, the monthly MACD has shown a bearish crossover, indicating that medium-term pressure remains.
Bitcoin fluctuated between 84,000 and 94,000 last week, forming a doji on the weekly chart, indicating a tug-of-war between bulls and bears. TradingView
The market generally bets on rate cuts, but 'hawkish rate cuts' have become the biggest variable.
If the FOMC cuts rates as expected this week, it will be the third rate reduction this year, accumulating a total easing of 175 basis points since September 2024. Generally, rate cuts symbolize improved liquidity and lower funding costs, which is beneficial for driving risk assets upward. However, observing the U.S. Treasury market, the 10-year yield has risen to 4.15%, indicating that the bond market has already bet on Powell possibly signaling a 'pause in the rate cut path' at the post-meeting press conference.
Analysts point out that if Powell emphasizes a slower pace of rate cuts in 2026, or suggests the need for more labor market and inflation data to support market easing expectations, this could lead to this rate cut being a 'hawkish rate cut', putting short-term pressure on risk assets. The derivatives market also shows the same warning: the put options prices for Bitcoin and Ethereum ($ETH) are generally higher than call options, indicating that investors are still guarding against downside risks. Additionally, the Bitcoin $20,000 put option expiring in June 2026 remains a popular choice, reflecting strong hedging demand from some traders against long-term corrections.
Key inflation data has been delayed, increasing the difficulty of policy interpretation.
The October PPI (Producer Price Index) inflation report, originally scheduled for release this week, has been forced to cancel due to the inability to complete sampling during the government shutdown. The U.S. Bureau of Labor Statistics stated that it will combine the October and November data for release in January 2026, leaving the market without important inflation information to reference during the FOMC week.
Nevertheless, most officials still rely on the recently released September core PCE as a benchmark. This data fell short of market expectations, significantly increasing the likelihood of interest rate cuts. Additionally, Kevin Hassett, who may succeed the Fed Chair, recently expressed support for a 25 basis point rate cut in an interview with CNBC, enhancing the clarity of policy signals in the market. However, the lack of complete inflation data also introduces uncertainty in policy interpretation, making it difficult for businesses and investors to accurately plan operations and finances for early 2026.
Historical warning: Following this year's 7 FOMC meetings, Bitcoin has dropped significantly 6 times.
Even though the market generally expects rate cuts, Bitcoin's historical trend shows another side. Analyst Ali Martinez compiled the market reactions following this year's 7 FOMC meetings, where Bitcoin saw significant pullbacks 6 times after the meetings, with an average decline of 15%. The largest drop was 25% after the January meeting, while the most recent drop was 19% following the October rate cut.
Analyst Ali Martinez compiled the market responses following this year's 7 FOMC meetings. X/@ali_charts
Additionally, the altcoin market is clearly showing signs of fatigue. According to CoinDesk indicators, CD20 has risen 1.34% since December, but CD80, which covers more small and medium-sized tokens, has dropped 1.37%. Meme coins and metaverse tokens have plummeted 53% and 62% this year, respectively, indicating that funds are concentrated in mainstream assets like Bitcoin and Ethereum, and market risk appetite has yet to recover.
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