In brief
- Bitcoin’s post-Fed drop is a classic “sell the fact” move, with traders having fully priced in the cut ahead of the announcement, Decrypt was told.
- A key risk is the 2026 U.S. election, which could spur fiscal stimulus and reignite inflation, pushing long-term rates higher and pressuring Bitcoin, an analyst said.
- AI-driven capital expenditure is also seen as a source of sticky inflation, further limiting the potential upside from monetary easing.
Bitcoin continues to trend lower even as the U.S. Federal Reserve slashed interest rates by 25 basis points on Wednesday.
“Fed officials used hedged language as they analyzed economic growth, inflation, unemployment, and the potential path of interest rates,” John Haar, managing director of Bitcoin financial services firm Swan Bitcoin, told Decrypt. He added that the Fed’s “reserve management purchases” of T-Bills this week, with an expectation to buy $40 billion over 30 days, “reflects the Fed’s first balance sheet expansion since it began QT in mid-2022, except for the March 2023 banking crisis.”
Easing interest rates promotes borrowing at lower prices, which is generally considered bullish for risk assets.
Still, Bitcoin is down 2% over the past 24 hours and is trading just under $90,200, according to CoinGecko data.
Users on prediction market Myriad, owned by Decrypt’s parent company Dastan, reflected this bearish sentiment, assigning just a 17% chance to a 2025 “Santa rally,” while the chances of Bitcoin rallying to $100,000 rather than dropping to $69,000 dropped by 5% overnight.
What’s driving Bitcoin lower?
The decline reflects the market pricing in a constrained future where the benefits of the current cut are outweighed by longer-term economic risks, Decrypt was told.
“Bitcoin’s decline after the rate cut is not a reaction to the cut itself, but rather the market pre-pricing a more complex future macro environment,” Tim Sun, senior researcher at HashKey Group, told Decrypt. The market had “fully priced in the cuts ahead of time,” Sun said.
The primary concern among analysts is that the room for further easing is shrinking.
Although Fed Chairman Jerome Powell did not provide explicit hawkish guidance, the Fed dot plot indicates rate-cut expectations for 2026 have been revised downward, suggesting the easing cycle is nearing its end.
Sun pointed to a looming political and economic pivot in 2026 as a critical risk.
“The U.S. will hold midterm elections in 2026, and the Trump administration will need looser fiscal policy and a more dovish Fed to maintain economic and market prosperity. This means the U.S. could briefly see a policy mix of fiscal stimulus plus monetary easing,” the analyst said.
However, he added, “such a combination is highly prone to rekindling inflation, pushing long-term rates higher again.” Once long-term rates rise, he added, “global risk assets come under pressure—including Bitcoin, which is sensitive to interest rates.”
An AI-driven uptick in capital expenditure, inflating energy and infrastructure costs, could also create a more persistent, or “sticky,” inflation environment, he added.
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