The Fed’s rate cuts turned Bitcoin’s dream of hitting $95k into a distant fantasy. Let’s face it, these quiet moves sent investors a mixed signal. After a brief rally, Bitcoin stumbled back, unable to shatter that sweet $100k barrier. The Fed’s cautious tone took the wind out of Bitcoin’s sails, leaving investors yawning. Correlations with equities certainly didn’t help. What’s next for Bitcoin? Well, that’s a tale worth exploring further.
While the Federal Reserve’s interest rate cuts in 2025 had everyone buzzing, Bitcoin enthusiasts were riding a rollercoaster of emotions. It was the third cut of the year on December 10th, slicing another 25 basis points, yet Bitcoin couldn’t quite keep up. A brief rally pushed it toward $94,000, only to settle lower. Talk about a tease! Despite the Fed’s moves, the digital currency failed to break that elusive $100,000 barrier.
With a 13% correction just a month earlier, Bitcoin’s performance was a mixed bag. The Fed’s rate cuts, totaling 75 basis points throughout the year, were supposed to be a boon for risk assets. Yet, Bitcoin’s lackluster response left many scratching their heads. Wasn’t it supposed to be an inflation hedge? Apparently not. Instead of soaring, Bitcoin treated these cuts with a bored yawn. The Fed’s cautious, hawkish tone didn’t help either, hinting at a possible pause in easing. Some officials worried more cuts would fan the inflation flames, especially with inflation at 3%, above the target of 2%. Guess they can’t win them all.
Bitcoin yawns at the Fed’s rate cuts, leaving investors puzzled over its inflation hedge promise.
Expectations were high, with the CME FedWatch placing an 88% probability on the December cut. But three dissenting Fed members marked the highest opposition since 2019. Their concerns? A slowing labor market and a 4.4% unemployment rate. Meanwhile, Bitcoin’s correlation with equities peaked at 0.87 in 2024, further blurring its role as a hedge. The evolving correlation dynamics with equities have been creating divergence across asset classes, complicating the narrative of Bitcoin as a straightforward hedge against inflation.
A $1 trillion crypto market cap collapse and net outflows of 43,292 BTC didn’t exactly scream confidence. The Fed’s policies drove 60% of crypto volatility, with the rest tied to equities and other macro factors. Yet, Bitcoin’s dominance as an institutional store of value grew stronger. Even Standard Chartered couldn’t make up its mind, slashing its year-end forecast to $100,000, while one analyst remained bullish, predicting a rise above $200,000.
Despite the drama, Bitcoin ETFs saw net outflows, contributing to its struggle to stay above $100,000. A spike in volatility hinted at exhaustion—Bitcoin’s dream seemed like chasing a mirage. The Fed’s quiet moves may have clipped its wings, but the drama was far from over.
