Bitcoin traders became noticeably more optimistic on Friday after the probability of a US Federal Reserve rate cut in December nearly doubled in 24 hours, injecting new hope into a market that has been falling for weeks.
Key takeaways:
- The odds of the Fed cutting rates increased from 39% to 69%, sparking renewed optimism among Bitcoin traders.
- Analysts say a shift from tightening to easing could fuel a strong BTC rebound.
- Some warn against overreacting, arguing that the market may be reading too much into moderate speech.
The change in expectations has already sparked speculation that a political turn could help Bitcoin stabilize after its latest downturn.
Bitcoin is trading around $85,071, down more than 10% over the past week, according to CoinMarketCap.
Fed Tapering Odds Increase After New York Fed President’s Dovish Comments
The catalyst came from the CME FedWatch tool, which showed the odds of a December rate cut rising to 69.40% on Friday, up from 39.10% the previous day.
Analysts pointed to comments from New York Federal Reserve President John Williams, who said the central bank could lower rates “in the near term” without jeopardizing its fight against inflation, language that markets interpreted as strongly dovish.
Bloomberg analyst Joe Weisenthal said Williams’ comments were the main reason the odds “increased enormously,” while social media sentiment among Bitcoiners quickly veered toward optimism.
Crypto analyst Moritz wondered if the increased odds of rate cuts would ultimately be enough to help Bitcoin “find a bottom.” Others were much more optimistic.
“Normally this would be bullish,” Mister Crypto wrote, as traders debated whether the Federal Reserve’s stance could revive demand for risk assets.
Rate cuts typically push investors toward assets like Bitcoin as yields on traditional instruments fall. Several analysts said the macroeconomic context now favors a reversal.
Crypto commentator Jesse Eckel called the setup “unfathomably bullish,” signaling the economy’s transition from a restrictive cycle to an easing one.
“I don’t know why we keep going down,” he said. Analyst Curb went further and predicted that cryptocurrencies will “explode in a massive rally.”
However, not everyone is convinced. Veteran economist Mohamed El-Erian urged traders not to “get carried away,” warning that markets may be reading too much into a single speech.
Coinbase Says Rate Cut Bets Were ‘Mispriced’
In a note on Friday, Coinbase Institutional argued that futures markets have been underestimating the chances of a rate cut.
“We believe the odds of a rate cut are actually mispriced,” the firm wrote, citing new tariff research, private sector data and real-time inflation trackers.
Coinbase said traders moved from expecting a 25 basis point cut to assuming the Federal Reserve would keep rates steady after inflation reports earlier this quarter raised concerns.
However, tariff effects, the company noted, are often reduce inflation and increase unemployment in the short term, effectively acting as a drag on demand and strengthening the case for cuts.
As reported, Bitcoin may remain stuck between $60,000 and $80,000 until the end of December if the Federal Reserve leaves interest rates unchanged at next month’s FOMC meeting, according to new analysis from XWIN Research Japan.
Analysts say a cautious Fed, still facing inflation near 3%, would likely maintain tight conditions, which historically weigh heavily on stocks and cryptocurrencies.
If no cut occurs, XWIN expects the market to remain range-bound, with risk appetite subdued until macroeconomic clarity returns.
The post Bitcoin Points to a Rebound as Chances of Federal Reserve Reduction in December Soar: Analyst appeared first on Criptonoticias.
