When Will Crypto Recover? Bitcoin Faces Extended Downtrend Amid Mixed Fed Signals

Bitcoin is trading near $86.96K after enduring its longest losing streak since mid-2024, with four consecutive weeks of red candles. The quarterly performance tells a grimmer story—down 24.43% year-to-date in Q4, marking the worst three-month span since 2018. Despite the bearish backdrop, price action has stabilized in recent sessions, but whether this signals genuine recovery remains hotly debated among market participants.

On-Chain Signals Suggest Hidden Strength

The weakness in price masks potential accumulation underneath the surface. On-chain metrics reveal the aggregate spot bid-ask delta at 10% depth has climbed to its second-highest reading of the year, indicating aggressive dip-buying and effective absorption of selling pressure. Interestingly, a similar bullish divergence during the March-April downturn preceded a 64% rally, leaving traders to wonder if history could repeat. Yet Sean Dawson, head of research at Derive, urges caution: “Pessimism has peaked, but I’d be careful of walking into a bull trap.”

Fed Policy Shift: The Game Changer

Market expectations have shifted dramatically. Probability-weighted pricing now shows a 70% chance of a December Fed rate cut, up sharply from 40% just one week prior. This policy pivot has provided temporary relief, with Bitcoin posting a 1.8% daily gain. However, headwinds persist—digital asset treasuries are trading below NAV, constraining institutional buying, while spot Bitcoin and Ethereum ETFs continue hemorrhaging capital through outflows.

Recovery Timeline Under Pressure

Regarding when crypto will recover to previous highs, Dawson sketches a cautious path: Bitcoin could potentially reach $100K by Q1 2026, but near-term risks dominate. The options market is screaming alarm signals, with heavy put positioning in the $80-85K range for December expiry. His base case sees Bitcoin briefly dipping into the mid-to-high $70K zone before finding support around $90K by year-end—assuming the Fed doesn’t turn hawkish.

The critical dates ahead are December 1 (end of quantitative tightening) and December 10 (Fed rate decision). These announcements will largely determine whether the current bounce holds or merely represents a false recovery attempt ahead of holiday volatility.