When the Federal Reserve wobbles: Bitcoin in chaos over the December rate decision

The night of December 12 will change the game for crypto markets. It’s not just a matter of 25 basis points more or less – the real earthquake will come from how the Federal Reserve communicates its next course. With Bitcoin currently at $90.78K after a 30% correction from its highs, and the FOMC deeply divided on how to manage an economy that is languishing under an inflation rate still above the 2% target, this meeting resembles less a technical decision and more a psychological stress test for the entire ecosystem.

The chaos inside the Fed: when hawks and doves cannot reach an agreement

December 2024 is not an ordinary meeting. On one side, labor market signals are fading – the government shutdown has obscured crucial macroeconomic data, and companies are voluntarily reducing their workforce. On the other side, current inflation remains stubborn, especially in services, with sticky costs refusing to fall toward the Fed’s target.

Some governors, like Williams of the New York Fed, argue there is still room to loosen. The hardliners from Boston and Kansas City counter: further cuts would be premature and risk fueling even more inflation. The Fed finds itself trapped in a decision paralysis, and the market knows well that this internal division will shape every move.

In October, we saw the prototype of this inconsistency: rate cuts + end of quantitative tightening, but Powell spent the entire press conference cooling down tensions, explicitly mentioning “significant divergences” within the Committee. The result? The dollar and Treasury yields rose anyway, while Bitcoin gave back all gains within 48 hours.

Three possible futures: what scenario awaits traders

Scenario 1 – The deceptive compromise (highest probability)

The Fed cuts by 25 basis points as expected, bringing rates to 3.50%-3.75%, but the dot plot for 2026 remains conservative – perhaps one or at most two additional cuts are forecasted. Powell repeats the mantra: “No preset path, depends on the data.”

In this case, Bitcoin could test resistance near all-time highs in the early hours, attracted by the tactical rally on the cut. But when Treasury yields stabilize and real rates start rising again, sentiment will waver. Expect sideways oscillations rather than a decisively bullish trend.

Scenario 2 – The dovish surprise (unlikely but possible)

The dot plot drops significantly, signaling at least two more cuts in 2026. The Fed reimagines quantitative tightening as simple “reserve management” and promises to keep abundant liquidity in the system.

This is pure fuel for Bitcoin. If it maintains $90,000, the narrative allows challenging $100,000. On-chain assets like Ethereum, DeFi protocols, and L2s would soar on the return of on-chain liquidity. Crypto ETFs would see a reversal in net flow.

Scenario 3 – The restrictive plot twist (the silent danger)

The Fed surprises with a hold, or cuts but drastically raises the long-term rate in the dot plot, signaling that “insurance cuts” are over and high rates will remain. The message: October and December were just emergency patches, not the start of a new easing cycle.

Here, the pain is real. Dollar and Treasury rise, and every asset valued on the hope of future cash flows (i.e., almost everything in crypto) gets hit. After a substantial correction, Bitcoin might seek new technical supports. Altcoins – especially highly speculative tokens – would face cascading liquidations.

The crucial moment: how volatility plays out

The hour immediately after the announcement will be pure chaos – algorithms, liquidations, and raw emotions will clash. Directional signals will be unstable. The true direction emerges only after the press conference, when investors have digested the dot plot and economic projections. Then it manifests in the following 12-24 hours.

This is the point: current inflation remains the overarching theme of this entire narrative. As long as it stays above 2%, the Fed will be tormented by uncertainty. For Bitcoin and the rest of the crypto market, this is not just a meeting – it’s a macro option expiring in a few hours. Liquidity, not the single rate cut, will determine the second half of this cycle.