Decoding Bitcoin’s macro setup – Why a 90% Fed cut could still swing both ways

Bitcoin has been consolidating below $95k ahead of the Fed rate decision scheduled for the 10th of December. 

While the odds of another 25 basis point cut have surged to nearly 90%, the market wasn’t sure whether it would be a hawkish or dovish cut. 

Source: CME Fed Watch Tool

The chance of a rate cut has increased by 3% over the past week and by more than 20% in the past month.

As rate cut expectations improved, the Bitcoin [BTC] correction eased above $80K and has been consolidating between $85K and $95K. 

Macro uncertainty vs. BTC bets

Last week, the fear that the Bank of Japan would hike rates and trigger another Yen carry unwind dragged BTC lower. Although the risk was still there, crypto options analytics firm, Amberdata, said, 

“Today’s volatility environment doesn’t seems nearly as sensitive to the BOJ interest rate regime.”

The firm added, 

“BTC held support nicely and created a nice “base” for us to trade from for the EOY December expiration environment.”

According to Amberdata, the odds for an end-of-year (EOY) rally were likely, but the immediate upside target was $100k. 

Even so, speculative interest in BTC has declined by 75%, and Funding Rates have also tanked, indicating low long-bias conviction, according to a Glassnode analyst. 

Source: Glassnode

This further reinforced the caution ahead of the Fed rate decision, despite higher chances of a 25-basis-point cut. The tone during the Fed chair Jerome Powell’s media briefing will determine how the markets react. 

Assessing odds of BTC hitting $100k

However, at press time, Options’ Top Volumes showed heavy leaning on the bullish side. In the past 24 hours, the most volumes were calls (bullish bets) eyeing $100k-$115k for the end-of-year price target. 

Source: Arkham

These are mostly sophisticated players who are more experienced in the market. However, on the retail side, as shown by Polymarket, the odds of hitting $100k by EOY were 41% while closing at $95k were 71%. 

For asset managers like Bitwise, however, the so-called ‘debasement trade’ or demand for safe havens remains an ongoing trend that will ultimately boost BTC, citing Harvard Investments.  

Bitwise CIO Matt Hougan quipped, 

“Harvard ramped its Bitcoin investment in Q3 from $117m ot $443m.  It also boosted its gold ETF allocation from $102m to $235m. Harvard decided to put on a debasement trade, and it allocated to Bitcoin 2-to-1 over gold.”

Final Thoughts 

• Fed rate cut expectations have surged to nearly 90%, boosting BTC price recovery in the past week. 
• While macro uncertainty still lingers, top players were betting on an end-of-year breakout to $100k-$115k.