Bitcoin Soars to Record High Above $106K, Then Retreats Amid Fed Rate Cut Concerns
Bitcoin (BTC) hit an all-time high of $106,000 in early Asian trading hours before retreating to $104,500. The pullback reflects investor caution ahead of the U.S. Federal Reserve's (Fed) anticipated rate cut.
Fed's Rate Decision Looms Large
The Fed is expected to cut its benchmark interest rate by 25 basis points, lowering it to 4.25%-4.5%. This marks 100 basis points of easing since September. While the cut could benefit risk assets like Bitcoin, concerns linger over hawkish Fed commentary possibly tempering future easing expectations. The decision, economic forecasts, and dot plot of rate projections will be released on Dec. 18 at 14:00 ET, followed by a press conference from Fed Chair Jerome Powell.
Hawkish Signals Could Weigh on Markets
September’s dot plot suggested 2.5 percentage points of cuts by 2026, potentially reducing rates below 3%. Analysts now expect a more cautious tone, with fewer 2024 rate cuts. Marc Chandler of Bannockburn Global Forex warned of a “hawkish” cut, citing economic resilience and inflation’s uneven path. Slower easing could push Treasury yields and the U.S. dollar higher, pressuring Bitcoin.
Bitcoin's Resilience and Bullish Seasonality
Despite risks, Bitcoin’s year-end seasonality and positive regulatory signals from President-elect Trump provide support. “A global rate-cutting cycle and expected Chinese easing sustain Bitcoin’s bullish outlook,” noted the LondonCryptoClub newsletter.
Key Economic Data Ahead
This week’s core Personal Consumption Expenditures (PCE) index report—the Fed’s preferred inflation measure—will reveal whether recent inflation upticks are temporary or more sustained.
The Bigger Picture
Bitcoin’s rally highlights its role as a risk asset closely tied to macroeconomic trends. Central bank policies, inflation, and regulation will continue to shape its trajectory. For now, markets are focused on the Fed’s next moves in this complex economic landscape.
