The Federal Reserve is Ready to Cut Rates: Is Crypto Ready for the Holiday Season or Tragedy?

The 86% Probability of December Rate Cut Has Changed the Game

According to the latest market pricing, the likelihood that the Federal Reserve will cut by 25 basis points at the December FOMC meeting has risen significantly—from 20% a week ago to 86%. This is not just a number; it reflects a deep shift in market sentiment and the central bank’s policy outlook.

The change came from a key economic report called the “Beige Book,” released by the Dallas Fed. This document covers economic conditions from 12 regions across America and has become a critical factor in FOMC decision-making due to the government shutdown that delayed much of the official economic data.

The Beige Book Shows the Real Situation: Economic Slowdown Spreading

Under the declared “moderate” inflation, the true picture is more complex. The labor market shows signs of change—almost half of the regional Fed offices reported decreasing hiring intentions among local businesses. This is significant because this trend is no longer isolated but spreading across various industries and regions.

Manufacturing and retail sectors continue to experience rising input costs. For example, aluminum cans have become more expensive, and healthcare costs keep rising—a problem that is hard to reverse. When businesses choose between maintaining profitability and accepting lower margins, the results are reflected in CPI and corporate earnings.

On the consumer side, high-income households continue to spend, but broader American middle- and low-income families are tightening their budgets. Electric vehicle sales have slowed due to reduced federal subsidies, showing how consumer spending on big purchases has become more cautious.

Regional Economic Data Shows “Distributed Fatigue”

The Boston area reported a slight increase in activity, but consumer spending remains flat, and employment has decreased. In New York, the climate is cooler—economic activity has declined, many large employers have reduced their workforce, and business confidence for the future is low.

The Philadelphia Fed directly stated that economic weakness began before the government shutdown. In Atlanta and Richmond, the economic landscape remains largely unchanged—stable but with no clear signs of growth.

Overall, the U.S. is not heading into a recession, but it is not experiencing strong growth either. Every corner of the economy shows varying levels of “fatigue,” and the cumulative effect is pushing the Federal Reserve to seriously consider the side effects of prolonged high interest rates.

The Monetary Policy Tone Has Shifted from “Hawkish” Mode

Federal Reserve officials are gradually changing their rhetoric. Instead of the continued narrative of “maintaining tight policy,” the new message is “monitor labor market weakness” and “consider the economic risks of over-tightening.”

This shift is subtle in wording but significant in implications. When the central bank begins to worry about the side effects of its own policies, it signals that the policy cycle has entered an adjustment phase.

The rate futures market responded immediately—the previously expected rate cuts in mid-2025 are now priced in for Q1 2025, and many investment banks forecast a rate cut before mid-year.

The Global Liquidity Cycle Is Starting

While the U.S. is adjusting, other major economies are actively injecting liquidity into the system.

Japan Launches Massive Stimulus: The new government is issuing 11.5 trillion yen in new bonds for economic stimulus—almost double the previous amount. The yen continues to favor investors, and Japanese yields have reached 20-year highs. The implication is clear: Asian capital is seeking new investment opportunities, and crypto assets are at the center of risk appetite.

United Kingdom Leads in Fiscal Pressure: The UK budget has set an unsustainable pattern. From frozen income tax thresholds to rising mansion taxes and dividend taxes, about one-quarter of the British workforce will fall into the 40% tax bracket. Short-term political gains will lead to a long-term fiscal black hole. Over the past seven months, the UK government has borrowed £117 billion—equivalent to the entire banking rescue during the 2008 crisis. As the fiscal gap widens, currency depreciation will become the market’s “escape valve,” and this points interest toward hard assets like Bitcoin.

Bitcoin at $90.81K: The Holiday Season Is Starting

Bitcoin has reached $90.81K (based on the latest data from January 12, 2026), with a 24-hour movement of +0.06% and a 30-day gain of +0.38%. This positioning is critical because it coincides with major seasonal market windows.

The correlation of the crypto market with US equities is close to 0.8, and their movements are synchronized. On-chain accumulation signals are increasing, indicating that institutions are actively accumulating at lower levels.

The “Christmas Rally” Season Is More Likely to Happen

Historical data is clear: over the past 73 years, the S&P 500 has risen around the Christmas season 58 times—with an 80% win rate. When the Christmas rally occurs, it often signals strong stock performance in the following year.

For Bitcoin and crypto, Q4 is naturally a bullish season based on historical cycles of mining, institutional allocation, and market sentiment. This year has additional factors: lower US rate expectations, improved Asian liquidity, clearer regulatory environment, and institutions returning to holdings.

Tragedy or Happy Holidays?

The question the market is asking is simple but profound: If US stocks rally during the Christmas season, will Bitcoin’s momentum be stronger? If traditional markets do not move, can crypto stand on its own?

The answer depends on the convergence of three factors: the Federal Reserve rate cut expectations rising to 86%, global liquidity injections from Japan and other developed markets, and the seasonal strength of crypto assets in Q4.

Based on the current trajectory, the “Happy Holidays” scenario is more likely than tragedy. But the crypto market is full of surprises, and low holiday liquidity can amplify any movement—up or down.

The key in the coming weeks is to watch US employment data, Federal Reserve communications, and on-chain institutional wallet movements. If all align, the new year could start with strong momentum for the crypto ecosystem.