Here's How The Fed's Anticipated Rate Cut Could Impact Crypto

Bitcoin's Sunday evening surge beyond $105,000 comes amid broader market anticipation of the Federal Reserve's expected interest rate cut, though analysts increasingly view the monetary policy shift as confirmation rather than a catalyst for the alpha crypto's next moves.

The leading crypto gained 3.5% over the past 24 hours to reach $105,004, extending its yearly advance beyond 140% as multiple tailwinds, including the recent U.S. election outcome and spot ETF inflows, set it off on a bullish momentum.

The Federal Reserve is expected to reduce rates by 25 basis points to between 4.25% and 4.50% at this week's Federal Open Market Committee meeting, according to CME's FedWatch Tool.

At press time, the tool shows a 93.4% chance, which would mark the second consecutive cut after November's reduction.

"I don't believe a Fed rate cut will have any substantial impact on the price trend, as the market has been expecting it for at least a few weeks now," Luis Buenaventura, head of crypto at GCash, told Decrypt.

Buenaventura notes that historical data shows two-thirds of instances where Bitcoin rises 50% in under 60 days, followed by an additional 35% gain in the subsequent two months after a cut.

"Bitcoin grew by 50% over the last few weeks recently, so the odds are in our favor that the momentum will continue," Buenaventura noted.

Market observers also cite structural factors beyond rate policy driving crypto prices. The appointment of former PayPal COO David Sacks as "White House AI & Crypto Czar" and proposals for a Crypto Advisory Council signal growing institutional engagement.

Those macroeconomic factors have historically fueled Bitcoin’s rise “as investors seek alternatives to traditional assets in a low-rate environment," Neal Wen, head of Global BD at Kronos Research, told Decrypt.

Bitcoin is king

Bitcoin's rise above $105,000 follows its 145% year-to-date gain, tracking from a 50% price increase since the U.S. presidential election.

The broader crypto market has followed this momentum, with Ether (ETH) returning to the $4,000 level, roughly 17% off from its previous all-time high in November 2021.

“While a rate cut is undoubtedly favorable for Bitcoin’s price, the market appears to have already priced in a 25 basis point cut in December,” Min Jung, research analyst at Presto Labs, told Decrypt. “As a result, the actual rate cut may have minimal direct impact on Bitcoin’s price.” 

While the Fed prepares its announcement in two days, traders appear focused on technical indicators and adoption metrics rather than rate policy alone, suggesting Bitcoin's trajectory may depend more on market structure and institutional engagement than traditional monetary factors.

“Instead, the focus will shift to the December FOMC meeting's Summary of Economic Projections (the dot plot) and comments from Powell regarding future rate cuts,” Jung said. “These factors, particularly any unexpected developments or surprises, will likely be the key drivers of Bitcoin's price action.”

Edited by Sebastian Sinclair