Key Developments and Market Impact
The Federal Reserve is widely anticipated to decide on a potential third rate cut for 2025 during its meeting scheduled for December 9–10.
This decision, amid market unease, could notably affect global liquidity and cryptocurrency markets, including Bitcoin and Ethereum.
Mixed Signals as Federal Reserve Weighs Third Rate Cut
The Federal Reserve's potential third rate cut of 25 basis points is met with divided opinions among its officials. Dissenters highlight differing preferences regarding further rate adjustments, echoing the discourse seen in previous meetings. The October FOMC statement set the stage, reinforcing expectations of upcoming decisions.
Market conditions are poised for change, as the cut signifies a turn towards more accommodative monetary conditions. Such a shift can increase liquidity in the economy, influencing asset valuations, including cryptocurrencies. Past cycles demonstrated crypto's appreciation in similar easing environments. "The Committee cited downside risks to employment and inflation that remains somewhat elevated."
Market participants and analysts await Jerome Powell's remarks, as these will dictate market strategies. Deutsche Bank analysts emphasize a cautious outlook with a likely final cut this year followed by a careful assessment of 2026 actions.
Crypto Markets and the Historical Impact of Rate Cuts
In past easing cycles, including 2020, cryptocurrency markets witnessed substantial inflows as traditional monetary policies became more accommodative, supporting sectors like BTC and ETH.
Bitcoin (BTC) is trading at $91,731.80, with a market cap of $1.83 trillion, representing 58.76% dominance. The currency experienced a 2.65% increase in 24 hours but faced a 24.46% decline over 60 days. Trading volume reached $54.48 billion with a 53.80% change.
A potential reinvigoration of risk assets like Bitcoin and Ethereum is suggested if the Federal Reserve continues down the easing path. This aligns with the typical crypto-market boost seen during periods of increased system liquidity and reduced opportunity costs in holding non-yielding assets.