December Fed Rate Cut to Help Bitcoin Breach $100K Resistance?

Bitcoin price has encountered strong resistance at the $100,000 level, with crypto investors eagerly awaiting the potential Fed rate cut in December to fuel the rally. According to the CME FedWatch tool, the probability of an interest rate cut during the upcoming FOMC meeting on December 18 has risen to 72.5%. Analysts are predicting a 25 basis point cut at this meeting.

Will Fed Rate Cut Fuel Crypto Market Optimism?

Crypto market investors are eagerly awaiting an interest rate cut of 25 basis points by the US Federal Reserve bringing it to the target of 4.25% to 4.5%. The US central bank currently maintains interest rates within a target range of 4.5% to 4.75%, following two rate cuts this year totaling 0.75%, which brought rates down from a 20-year high.

The Fed rate cuts are usually bullish for Bitcoin and the overall crypto market as they will flood fresh liquidity in the market. The BTC price has been facing multiple rejections at $100,000 and is currently flirting around $96,000. Chris Newhouse, director of research at Cumberland Labs said:

“While we’re seeing strong institutional buying pressure, particularly from entities like MicroStrategy’s continued accumulation strategy, the broader crypto ecosystem is experiencing a diversification of capital flows from both institutional and non-institutional participants”.

One positive development is that the inflows into spot Bitcoin ETFs are picking up once again. On Monday, the total inflows stayed at $353 million, with BlackRock’s IBIT alone contributing $338.3 million. Several traditional BlackRock funds have also invested in IBIT over the past few months.

On Monday, December 2, Fed governor Christopher Waller hinted at the possibility of a rate cut ahead this month. During a monetary policy meeting yesterday, he said: “at present, I lean toward supporting a cut”. This has further heightened the probability of monetary easing.

During yesterday’s meeting, New York Fed Bank President John Williams addressed the Queens Chamber of Commerce in New York, stating that he anticipates interest rates to decrease “over time.” However, he did not specify whether he would support a rate cut at the upcoming meeting. Following this commentary, the probability of rate cut surged by 8 points yesterday, per the CME FedWatch tool.

Bitcoin to Altcoins Capital Flow Shift

With the Bitcoin price entering a strong consolidation phase, attention is shifting to altcoins like Ethereum, XRP, Cardano, which relatively underperformed in comparison to BTC following President Donald Trump’s victory. The XRP price rally has extended to $2.73 with on-chain metrics showing strong investor optimism.

The crypto options market has witnessed increased demand for downside protection in Bitcoin for December expiries. Meanwhile, Bitcoin futures have shown moderate leverage, staying subdued following the digital asset’s peak at $99,000. Vetle Lunde, head of research at digital-asset research firm K33 wrote:

“On-chain data point toward active profit realization from traders in the medium-term cohort (traders who bought in the range of 55k-70k), and profit taking has been particularly intense with BTC trading north of 90k”.

Furthermore, with Donald Trump taking charge of the US Presidency next month, investors remain optimistic about pro-crypto legislation coming their way. Trump has already started appointing crypto-friendly lawmakers to his team and is reportedly working for a ‘crypto czar’ position at the White House.