With a Fed Policy Shift Imminent, What Is Key for Bitcoin's Year-End Sprint to $100,000?

Bitcoin’s price climbed back above $91,000 during the morning trading session on December 8, up about 1.86% from the previous day. The main driver behind this surge is the market’s firm expectation that the Federal Reserve will announce an interest rate cut this week.

Currently, traders are pricing in an 88.4% probability that the Fed will cut rates at its December meeting. This expectation is mainly fueled by recent U.S. economic data showing that inflationary pressures are steadily easing.

01 Market Dynamics: Policy Expectations Drive Price Rebound

According to the latest data from December 8, Bitcoin’s price rebounded to $91,398.6, marking a 2.2% intraday increase. This rebound occurred after Bitcoin briefly dipped below $84,000 last week, highlighting the market’s high sensitivity to the Fed’s policy shift.

The overall crypto market is warming up. Ethereum rose 3% to $3,127.92, XRP rose 2.5% to $2.08, and both Solana and Cardano were up 2%. Market sentiment appears to be recovering from previous caution.

Traders are now fully focused on the Fed’s statement and Chairman Jerome Powell’s comments, which are set to be released later this week. Whether Bitcoin can maintain its upward momentum largely depends on whether the Fed delivers on the market’s expectations for a rate cut.

02 Policy Shift: How Rate Cut Expectations Impact the Crypto Market

The market’s expectation for a Fed rate cut is not unfounded. The Fed’s preferred inflation gauge—the core personal consumption expenditures (PCE) price index—rose just 0.2% month-over-month in October, with the annual growth rate slowing to 2.8%. This reinforces the view that price pressures are steadily easing.

Based on the Fed’s latest March economic forecast, policymakers’ median projection for the federal funds rate is 3.9% in 2025, 3.4% in 2026, and dropping to 3.1% by 2027. This forecast provides a policy framework for a downward rate path.

ICBC International Chief Economist Cheng Shi points out that looking ahead to Q4 this year, the Fed’s policy focus may further shift toward the labor market. Against the backdrop of expanding U.S. fiscal deficits and increased political intervention, the pace of rate cuts may accelerate.

Low interest rate environments are typically favorable for risk assets, as they weaken the dollar and increase the appeal of non-yielding assets like Bitcoin. This macroeconomic backdrop creates favorable conditions for cryptocurrencies such as Bitcoin.

03 Uncertainties: Potential Risks in the Policy Path

Despite strong market expectations for a Fed rate cut, uncertainties remain. In recent weeks, conflicting public statements from Fed officials have sparked uncertainty about the speed and magnitude of policy easing through 2026.

Economists warn that, given the structural rise in the neutral rate, excessive easing could damage the Fed’s policy credibility and risk reigniting inflation. This balancing act complicates the Fed’s decision-making process.

Blockchain analyst Andre Dragosch notes that if inflationary pressures persist and exceed 5%, the new Fed chair could face the prospect of deeply negative real interest rates, which could create a historically favorable environment for assets like Bitcoin.

Another risk facing the market is if the Fed’s stance turns out to be more hawkish than expected, or if inflation proves sticky, forcing policy to remain tight. Historically, such scenarios suppress risk assets and increase crypto market volatility.

04 Trading Perspectives: Reference Strategies for Gate Users

For Gate trading platform users, understanding the dynamic relationship between Fed policy and crypto asset prices is crucial. Bitcoin climbed to a peak of $126,000 in October before dropping to around $75,000 in April, and this volatility underscores the need for clear strategies during policy-sensitive periods.

Savvy traders can time their moves by tracking several key indicators: changes in U.S. real interest rates, expansion of the Fed’s balance sheet, and the trend in the U.S. dollar index. These indicators can serve as proxies for liquidity and market risk appetite.

On an operational level, closely monitoring key breakouts in the dollar index and U.S. 2-year Treasury yields can serve as directional triggers for Bitcoin before and after policy communication windows. Risk management is also vital—setting stop losses below key support levels can help mitigate downside risks from unexpected hawkish turns.

On-chain data shows that Bitcoin wallet addresses and transaction volume have grown by 15% over the past quarter, indicating rising adoption rates. This strengthening fundamental, combined with a favorable macro environment, may support continued Bitcoin price increases.

05 Historical Context: Interaction Between Policy Cycles and Crypto Markets

Looking back, Bitcoin’s price has often been closely tied to the Fed’s policy cycle. Bitcoin began to surge sharply at the end of 2024 as expectations for a Fed policy shift gathered momentum, with looser financial conditions seen as a key catalyst.

Experience shows that in situations of cost-push shocks or policy transmission lags, strictly following the traditional Taylor rule could amplify downside risks to the economy. This explains why the Fed may adopt a more flexible policy stance in the current environment.

Well-known investor Mike Novogratz has said that if the Fed chair turns dovish, it could drive Bitcoin significantly higher. This view highlights the close connection between macroeconomic policy and crypto market dynamics.

From a broader asset allocation perspective, a continued Fed rate-cutting path will accelerate the global asset repricing process. The combination of moderate inflation and declining real rates favors physical assets and precious metals, and Bitcoin, as digital gold, may also benefit.

Outlook

With the Fed’s December rate decision approaching, the market is holding its breath. Bitcoin has already topped $91,000 on December 8 and is gathering momentum for a push to higher levels.

If the Fed launches a rate-cutting cycle as expected and sends a clear easing signal, Bitcoin will receive a vital policy tailwind. At that point, a run at $100,000 will shift from a bold prediction to an attainable market target.

Conversely, any unexpected hawkishness could halt the rally abruptly. On trading platforms such as Gate, investors are adjusting their positions, all sharing the hope that the green light for a policy pivot will spark a new uptrend in the crypto market.