Market Analysis: Fed Rate Hike Speculation and Crypto Outlook

Market Analysis: Fed Rate Hike Speculation and Crypto Outlook

Key Takeaways:

• Market volatility due to Federal Reserve interest rate speculation.
• Potential impact on Bitcoin and Ethereum prices.
• Overview of key market trends in the cryptocurrency sector.

The market is experiencing significant shifts driven by the uncertainty surrounding the Federal Reserve's interest rate decisions. Initially, economic data suggesting easing inflation and a weakening labor market led to widespread expectations of an imminent rate cut. However, subsequent hawkish statements from Federal Reserve officials significantly reduced these expectations. Later, dovish signals from New York Federal Reserve President Williams have boosted the odds of a rate cut once again.

Currently, a significant number of FOMC members lean towards holding interest rates steady, creating a balanced situation that makes the outcome of the December meeting uncertain. Michael Hartnett, Chief Investment Strategist at Bank of America, suggests that the current liquidity squeeze is already affecting various asset classes, including cryptocurrencies, credit, and bank stocks. He sees the weak performance of these assets as mirroring conditions similar to those seen in December 2018, potentially forcing the Fed to adopt a more accommodative stance.

Looking back, the cumulative rate cuts by global central banks in 2025 fueled a liquidity surge, driving intense investment in AI and speculation in cryptocurrencies. Looking ahead, Hartnett predicts that the Fed will 'policy surrender' in 2026 and begin a rate-cutting cycle. In such a scenario, long-duration zero-coupon bonds, Bitcoin (as a liquidity 'canary'), and mid-cap stocks (sensitive to financing costs) would be among the primary beneficiaries.

The Bitcoin market itself is experiencing fluctuating sentiment, oscillating between fear and speculation. Prices recently dipped to a six-month low, triggering a 'death cross' technical pattern. According to analyst Mister Crypto, historical death cross patterns have led to significant Bitcoin price declines in the past. Failure to quickly reclaim cost basis prices could confirm a deeper bear market trend, with potential for prices to fall to near $74,500. Analyst Rekt Capital also sees that Bitcoin's macro uptrend has been broken, indicating that a weekly close above $86,000 would target the $93,000 resistance level.

In contrast, analyst HalfSummer suggests that $80,500 may represent a significant low in this bear market. However, he cautions that this does not signal the end of the bear market, which could continue for several more months. Despite these bearish sentiments, Bitcoin saw a strong weekend rebound, rising nearly 10% to $88,000. Analysts such as CryptoMichNL and Crypto Auris anticipate that prices may first fill the CME gap at $85,200 before challenging the $90,000 to $96,000 range. Aegon highlighted key resistance levels at $88,400, $93,600, and $99,420. Bitwise CEO Hunter Horsley revealed that he increased his Bitcoin holdings at the $85,000 price level.

The Ethereum market also experienced significant volatility, with prices dropping 15% to a four-month low of $2,625. This drop resulted in the liquidation of $460 million in leveraged long positions and saw spot ETFs record net outflows for nine consecutive trading days, totaling $1.33 billion. However, data from the derivatives market suggests a glimmer of optimism. Analyst Marcel Pechman notes that despite the price decline, ETH perpetual futures funding rates have remained stable, and even large traders on the OKX exchange have been increasing their long positions. This suggests that the market may be gearing up for a rebound towards $3,200. Analyst Man of Bitcoin sees an ETH target price of $2,889, while Ted suggests that if ETH successfully reclaims the $2,800-$2,900 range, it could rally towards $3,300-$3,400.

Bitwise CIO Matt Hougan highlights that the market is overlooking the upcoming Fusaka upgrade in December. He believes that this is an underappreciated catalyst that will significantly enhance Ethereum's value capture ability and could trigger another rebound. Liquid Capital founder Yi Li Hua announced that he has fully loaded on ETH at around $2,700, considering it a cornerstone of his large public chain allocation.

The weekend saw increased controversy surrounding Strategy (MSTR) due to a JPMorgan Chase report about MSTR's removal from the MSCI index, sparking boycott actions by the crypto community. Meanwhile, Bitmine chairman Tom Lee indicated that institutional investors are hedging risk by shorting Strategy (MSTR) stock, due to the on-chain liquidity drought in the derivatives market. Analyst RamenPanda suggests that MSTR may be excluded from the MSCI index on January 15, 2026, due to Bitcoin assets exceeding 77% of total assets, potentially triggering an $8-9 billion forced sell-off, further exacerbating liquidity and stock price pressures. MSTR stock prices have already fallen 64% from their highs, and its 'issue shares to buy coins' model is unlikely to be sustainable. Additionally, the new MSCI rule (excluding companies with digital assets exceeding 50% from major indices) also poses a potential impact on other companies holding Bitcoin reserves.

In project news, decentralized AI data network Port3 Network experienced a hack due to a bridge vulnerability, resulting in the minting of 1 billion additional tokens that were sold on-chain. This led to a significant drop in the price of its PORT3 token, and Binance announced the delisting of PORT3 perpetual contracts. Bybit also suspended related trading. The current market capitalization of PORT3 is shown as 0. Additionally, the pump.fun team is alleged to have cashed out nearly $400 million in funds in the past week, causing its PUMP token price to break issue and fall by nearly 30% in the past week. Coinbase announced on Friday its acquisition of Solana on-chain trading platform Vector.fun. Tensor (TNSR), which is related to Vector, has risen from $0.0418 on November 19 to a maximum of $0.365, and the price is currently down to $0.1485, with 24-hour gains narrowing to 67%. In addition, the long-awaited Monad token sale on Coinbase has ended, and it is scheduled to be distributed today and will be traded on Solana.