The suspense countdown reveals the Federal Reserve's interest rate cut: will cryptocurrency ascend or fall?

In the third quarter of 2025, the initial annualized quarterly rate of U.S. GDP is only 0.9%, showing significant economic weakness and providing support for interest rate cuts; in October, the core PCE price index increased by 2.6% year-on-year, alleviating inflationary pressures and revealing room for policy adjustments. CME FedWatch shows an interest rate cut probability as high as 89.2%, but there is a risk of buying expectations under consistent expectations and selling facts. This decision will also release new economic forecasts and dot plots, which may exceed expectations.

Market Status: Contradictions and Risks in Expected Market Trends

Before the decision, Bitcoin broke through $94,000, and Ethereum rose above $3,300, partially reflecting expectations of an interest rate cut. However, the Fear and Greed Index for cryptocurrencies is neutral, and investors are mostly holding a wait-and-see attitude. Leverage levels remain high, with the funding rate for perpetual contracts across the network at elevated levels; if the decision falls short of expectations, highly leveraged long positions may face liquidation. On December 10, over $300 million in short positions have been liquidated, and the market is volatile.

Impact Mechanism: Multi-channel Transmission

Interest rate cuts influence the cryptocurrency market through liquidity, U.S. dollar exchange rates, and changes in risk appetite. A loose environment may attract capital inflows; historically, Bitcoin has shown a negative correlation with U.S. Treasury yields; interest rate cuts may weaken the dollar, enhancing the attractiveness of cryptocurrencies; and loose policies can boost confidence, driving funds into other currencies. After the interest rate cut in September 2024, Bitcoin and Ethereum rose, but the environment is different this time.

Scenario Analysis: Three Outcomes and Market Reactions

Dovish rate cut 40%: a 25 basis point rate cut while releasing further easing signals, Bitcoin may surge to $96,000 - $98,000, Ethereum may test $3,500, and altcoins may rebound. Hawkish rate cut 45%: a 25 basis point rate cut but emphasizing inflation risks may lead the market to adjust, with Bitcoin retracing to $90,000 - $91,000, Ethereum testing $3,200, and highly leveraged longs facing liquidation. Hold steady 15%: maintaining interest rates, the market oscillates, Bitcoin may drop to $88,000 or even lower, with total liquidations exceeding $1 billion, though this scenario is less likely.

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