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Fed calls off December interest rate reduction, 18% likelihood of increase, Bitcoin rally slows down.
The Federal Reserve has recently lowered the policy rate by 25 basis points, adjusting the target range to 3.75% to 4.00%. However, futures markets have now eliminated the possibility of an additional cut in December.
Prior to yesterday’s FOMC meeting, numerous traders anticipated a third rate reduction due to a gradual decrease in inflation, indications of a softening labor market, and the Fed’s initial steps towards easing.
Although the Fed did implement a cut this time, Powell stressed that another reduction in December is “not a foregone conclusion, far from it.”
Powell stated.
“There were strongly different views today. And the takeaway from that is that we haven’t made a decision about December, and we’re going to be looking at the data that we have and how that affects the outlook and the balance of risks.”
As per CME FedWatch, probabilities shifted after the press conference from a near certainty of an additional cut to a hold as the base case, with a potential hike tail, and rate path distributions for 2026 moving upward and flattening.
This adjustment results in a more challenging liquidity environment for crypto, with increased sensitivity to incoming macroeconomic data and a wider range of performance across tokens.
| Scenario | Pre-presser | Post-presser |
|---|---|---|
| Cut | ≈ 96% | 0% |
| Non-cut (hold or hike) | ≈ 4% | ≈ 100%* |
| Scenario | Probability |
|---|---|
| Hold | ≈ 70% |
| Hike | ≈ 20%–30% |
According to FedWatch, January 2026 maintains a hike tail near 18.5 percent, indicating ongoing concerns that persistent inflation could prompt the Committee to consider a reversal if data does not show signs of cooling.
| 25 bps hike | Probability |
|---|---|
| Tail | ≈ 18.5% |
The long-term trajectory has been repriced higher. FedWatch distributions through 2026 have collectively shifted approximately 25 basis points upward and flattened, with modal outcomes clustering around 3.00% to 3.25% through mid- and late 2026 and extending into 2027.
Previous snapshots indicated a preference for 2.75% to 3.00% late in 2026. This profile suggests fewer and later cuts, and a market perception that the neutral real interest rate is above earlier estimates.
| Horizon | Modal target range | Comment |
|---|---|---|
| Mid-2026 (Jun, Jul, Sep) | 3.00%–3.25% | Mode shifted up, flatter distribution |
| Late-2026 (Oct, Dec) | 3.00%–3.25% | Earlier flirtation with 2.75%–3.00% has faded |
| 2027 | 3.00%–3.25% | No swift glide to pre-2024 “neutral” |
The immediate market implications for crypto relate to liquidity and interest rates.
A prolonged higher stance supports the dollar and maintains firm real yields, which has frequently impacted high-beta risk and long-duration narratives associated with distant cash flows.
Bitcoin has generally absorbed this pressure with less decline compared to smaller capitalization tokens and alt-L1s. Nevertheless, overall crypto liquidity, including stablecoin float and perpetual leverage, still mirrors the same macroeconomic environment.
With balance sheet reduction continuing and the policy rate elevated, the cost of capital within crypto ecosystems remains limited, and treasury-bill alternatives divert some marginal demand away from basis and carry structures.
Flows are becoming increasingly data-dependent. Spot ETF and fund allocations are responsive to fluctuations in hike tails surrounding significant economic reports.
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Rising inflation or strong labor data tends to increase near-term hike probabilities and exert pressure on risk, while clear disinflation can rekindle demand for duration and growth proxies.
This environment encourages quicker rotations between BTC and altcoins as probabilities shift, with allocators favoring higher-quality balance sheets and liquid pairs during periods of uncertainty.
Policy uncertainty also alters the volatility landscape.
A broader hike tail expands the range of potential outcomes for crypto returns, and correlations to real yields and the dollar index often increase ahead of key macroeconomic releases.
This trend can heighten dispersion within crypto, with projects supported by more precise cash flow or fee capture performing better than tokens with long-term tokenomics and significant emissions.
Funding markets may become less expensive as the risk-free anchor rises, and miners encounter higher discount rates for capital expenditures and future cash flows, which draws attention to power costs, leverage, and treasury mix.
Scenario mapping for the next one to three months revolves around three potential paths.
The base case indicates a December hold with approximately 70 percent odds based on the latest snapshot, as growth cools and inflation has not yet softened sufficiently to warrant another rapid cut. In this scenario, real yields remain firm, equities and crypto experience volatile trading ranges, and BTC performance tends to show resilience compared to high-beta alt exposure.
A hawkish surprise, characterized by a 25 basis point hike in December or January from the aggregated 20 to 30 percent tail, would intensify risk-off pressure, strengthen the dollar, and compress valuations across long-duration crypto, increasing drawdown risk for leverage-intensive segments while directing flows toward cash-flowing infrastructure and quality L2s.
A dovish surprise, where core measures convincingly decline, would allow cuts to re-enter mid-2026 pricing. The liquidity impulse would initially boost BTC as the most straightforward macro proxy and then expand if the soft-landing narrative gains traction.
Portfolio construction in this context often emphasizes liquidity management, basis calibration, and convexity.
Given its depth and cleaner macro beta, BTC remains the most direct instrument for tactically expressing shifts in policy odds surrounding CPI, PCE, and labor reports. Within altcoins, dispersion screening regarding runway, emissions, and fee capture becomes more significant when the risk-free anchor is elevated.
For miners, sensitivity to power pricing and balance sheet leverage increasingly influences equity-linked tokens and revenue sharing, and forward hedging costs must be balanced against spot upside optionality.
“The cut landed, but the pivot did not, and traders now lean higher for longer through 2026.”
According to CME FedWatch, the repricing is evident across the entire curve of meeting outcomes, with the December 10 meeting now presenting a hold as the base case and a notable hike tail.
As stated by the Federal Reserve, the benchmark move achieved the cut, while communication maintained a slow and conditional easing path. The December meeting now comes into focus with a hold as the central probability and a live hike tail.
Fed rate current probabilities as of Oct 30, 2025 (Source: CME FedWatch)
FedWatch probabilities are derived from futures and update intraday. Snapshots here reflect the attached tables at the time of capture.
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