ZENITH ZORO

Understanding Why Rate Cuts Do Not Always Pump the Market
Many new investors believe that whenever the Federal Reserve cuts interest rates, the market should immediately start pumping. But in reality, the market does not react to rate cuts based only on their existence, it reacts to the reason behind the rate cut. Sometimes the market falls even after a rate cut, and sometimes the market pumps even when there is no cut. This creates confusion for those who do not understand economic behavior. The truth is that the market tries to understand whether the cut is coming from strength or weakness. If the economy is strong and the Fed cuts rates, the market takes it positively. But if the economy is weak and the Fed cuts rates out of pressure, the market takes it negatively. This article explains why the 10 December rate cut is different and why its impact can be important for both traditional markets and crypto.

Good Rate Cut vs Bad Rate Cut: The Foundation of Market Reaction

In economics, not all rate cuts are the same. A Good Rate Cut happens when the economy is healthy, job numbers are strong, inflation is under control, and the Fed cuts rates to maintain long-term stability. This is called a “precautionary” or “soft” rate cut. Markets usually treat this as a positive signal. A Bad Rate Cut happens when the economy is already under pressure, unemployment is rising, inflation is unstable, and the Fed is forced to cut rates. This type of cut is seen as panic, and markets often crash after it. Historical data from 1970 to today shows that soft rate cuts have brought strong market performance, while panic cuts have caused heavy downtrends. Understanding this difference helps investors prepare for what 10 December may bring.

Why the 10 December Rate Cut Looks Like a Good Rate Cut

Recent US job data supports the case for a good rate cut. On 4 December, the November unemployment claims report revealed that only 1,90,000 people applied for unemployment benefits, while the market was expecting 2,18,000 applications. Lower unemployment means the job market is strong. This is also the lowest unemployment figure since 2022. A strong job market means the economy is stable, and the Fed is not cutting rates under pressure. Inflation is also moving between 2% to 3%, which is near the Fed’s long-term target. These two conditionsstable jobs and controlled inflationclearly show that the Fed is comfortable. Therefore, the 10 December rate cut is a precautionary, positive, and growth-supportive decision.

What History Tells Us: Soft Rate Cuts Have Produced Strong Markets

History gives us clear evidence about how markets behave after different types of cuts. Since the 1970s, economists have categorized rate cuts into three groups: panic cuts, soft cuts, and hard cuts. Soft cuts—when the Fed cuts without pressure—have repeatedly resulted in strong market performance. Two major examples are 1984 and 2019, where soft rate cuts led to positive market momentum over 12, 24, and even 36 months. On the other hand, panic cuts like 2007–2008 resulted in heavy market crashes. This comparison shows that the reason behind the cut matters more than the cut itself. If 10 December follows the same pattern as previous soft cuts, the next 12 to 36 months could become a positive cycle for both stocks and crypto.

Bitcoin’s Technical Position Ahead of the Rate Cut Event

Bitcoin’s chart is already at a very important technical stage. BTC recently fell below the 50-week moving average, but it successfully bounced from the 100-week moving average, which is a strong long-term support. For the next big move, Bitcoin must retest and break above the 50-week moving average. If BTC breaks the upper resistance on strong volume, a new all-time-high trend can begin. But if it fails and gets rejected, the price may stay in a sideways or downward range temporarily. Technical indicators match perfectly with macro signals. Markets usually make their final decision after rate cut clarity. That is why the next few weeks hold major importance for Bitcoin traders.

Fed Balance Sheet: The Hidden Factor That Can Accelerate Bitcoin

Besides interest rates, there is another powerful factor that affects Bitcoin: the Federal Reserve’s balance sheet. When the Fed expands its balance sheet (quantitative easing), liquidity increases and Bitcoin usually pumps. When the Fed reduces its balance sheet (tightening), Bitcoin often slows down. In early December, Fed’s balance sheet tightening had nearly stopped, which is a strong signal that easing may begin in the new year. If the Fed begins buying assets again, Bitcoin can break its long-term resistances and head toward a major breakout. But if tightening continues, Bitcoin may face temporary pressure near the 50-week moving average. This balance sheet movement will play a big role in Bitcoin’s direction after 10 December.

Miner Production Cost: The Strongest Psychological Support Level

Bitcoin miners play a very important role in the market. The current miner cost of producing 1 BTC is around $90,000. Historically, Bitcoin almost never stays below miner cost for long periods. This creates a natural long-term support level. If the price goes near miner cost, miners hold their supply, and selling pressure reduces automatically. This gives Bitcoin stability in bearish phases and strength in early bull cycles. In the coming months, if the Fed moves toward easing and liquidity increases, miners may again begin accumulating. This would make the $90,000–$100,000 zone one of the strongest supports of this cycle, reinforcing long-term bullish sentiment.

Altcoin Psychology: Why Retail Investors Keep Losing Cycles

Most retail traders make the same mistake every cycle. They ignore Bitcoin and buy random altcoins hoping for quick profits. But altcoins follow a fixed pattern: 6 months bull → 6 months bear → repeat. Retail greed creates unnecessary losses because people buy altcoins when they are already high. On the other hand, Bitcoin maintains long-term strength because institutions, miners, and smart traders prefer it. When rate cuts or easing cycles begin, Bitcoin pumps first, altcoins follow later. Understanding this psychology helps investors avoid emotional decisions. Smart traders will focus on Bitcoin during macro transition phases and shift to altcoins only after BTC establishes a strong upward breakout.

Final Conclusion: Why This Rate Cut Matters for the Next 12–36 Months

The 10 December rate cut is not just another economic event. It has the potential to become the defining turning point of the entire market cycle. It is a good rate cut, backed by strong job data, stable inflation, and a confident Federal Reserve. History shows that soft rate cuts have produced long-term bullish markets. Bitcoin’s technical setup aligns strongly with these macro conditions. If Bitcoin breaks above the 50-week moving average and if the Fed begins balance sheet expansion, a powerful multi-month rally may begin. If tightening continues, a small correction may come before the next leg up. For long-term investors, this phase could become one of the most important opportunities of this entire cycle.
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