SKN | Bitcoin Traders Eye Potential Bottom as December Fed Cut Odds Jump to 69%

Optimism returned to the crypto markets on Friday after the probability of a December Federal Reserve interest rate cut nearly doubled overnight. The sudden shift in monetary policy expectations has reignited speculation that Bitcoin ($BTC), which has shed nearly 10% of its value in the past week, may have finally found a local bottom.

The Macro Pivot

Data from the CME FedWatch Tool reveals a dramatic repricing of risk. On Thursday, markets priced the probability of a rate cut at the upcoming FOMC meeting at just 39.10%. By Friday, those odds had surged to 69.40%.

Market observers attribute this rapid sentiment shift to dovish remarks from New York Fed President John Williams, who suggested the central bank could cut rates “in the near term” without jeopardizing its inflation targets. This dovish pivot provided immediate relief to risk assets. In high-interest-rate environments, capital typically flees high-beta assets like cryptocurrencies in favor of risk-free yields in Treasury bonds; a reversal of this dynamic is historically a primary driver for crypto bull runs.

From Tightening to Easing

Despite Bitcoin trading around $85,071—down 10.11% over the trailing seven days—analysts view the macro shift as a critical turning point. “If you zoom out, the setup is unfathomably bullish,” noted crypto analyst Jesse Eckel, emphasizing the transition from a tightening cycle into an easing cycle.

However, the psychological state of the market remains fragile. The Crypto Fear & Greed Index, a key gauge of investor sentiment, posted an “Extreme Fear” score of 14 on Friday. This disconnect between improving macro fundamentals and depressed price action often signals a capitulation point, where retail investors sell into fear while institutional investors position for the cycle turn.

Institutional View: Mispriced Risk

Coinbase Institutional weighed in on Friday, arguing that the market had been severely mispricing the likelihood of a cut. While futures markets had shifted toward a “hold” following the October FOMC meeting due to lingering inflation concerns, Coinbase analysts pointed to private market data and real-time inflation indicators as evidence for necessary easing.

Notably, the firm challenged the consensus view on trade tariffs. Contrary to the belief that tariffs are purely inflationary, Coinbase suggested that tariff hikes could act as “negative demand shocks,” lowering inflation and increasing unemployment in the short term. This scenario would likely force the Fed’s hand toward liquidity injection, creating a favorable environment for scarce assets like Bitcoin.

The immediate path forward for Bitcoin hinges on whether this renewed rate-cut conviction holds through the next round of economic data releases. While the jump in probability offers a reprieve for bulls looking to defend the $85,000 support level, the stark divergence between “Extreme Fear” sentiment and dovish macro signals suggests a volatile period of price discovery lies ahead. Investors will be watching closely to see if the Fed validates these expectations, potentially catalyzing the liquidity rotation necessary to reverse the current downtrend.