Cryptocurrency markets rallied as traders priced in an increasingly likely Fed interest-rate cut, lifting Bitcoin and Ethereum amid expectations of greater liquidity. Market-implied odds of a 25 basis point cut reached 89.4%, driving sharp gains in risk assets while prompting traders to prepare for elevated volatility around the Fed’s decision on December 10, 2025.
Market pricing suggested a near-certain 25 basis point easing, a shift traders said would lower the opportunity cost of holding non-yielding assets and funnel capital into crypto. The prospect of easier policy reinforced the view that additional liquidity could support risk assets, particularly the largest cryptocurrencies.
Bitcoin held above key support near $92,000, pushed past $94,000 and at times traded in the $115,000–$118,000 band, reflecting strong momentum as rate-cut expectations intensified. Traders framed the move as a function of improving liquidity conditions and renewed risk appetite.
Ethereum rose roughly 7% and decisively broke above its 50-day exponential moving average, with traders now targeting ETH in the $5,000–$6,000 range. Institutional ETF inflows and concentrated purchases by large holders contributed to the momentum, and some participants positioned for a dramatic expansion of the Fed’s balance sheet — a scenario described in market commentary as a potential tailwind for risk assets if quantitative tightening halts.
Fed rate-cut hopes and liquidity flows
Traders emphasized that FOMC decision days historically amplify crypto volatility, with Bitcoin’s intraday volatility spiking 50–100% versus a normal session. That sensitivity cuts both ways: episodes of fading rate-cut hopes have driven Bitcoin down toward $80,000–$100,000, and a prior 33% collapse to $81,636 erased more than $1 trillion from the crypto market cap.
Those downturns often involve rapid deleveraging, as liquidation events have exceeded $700 million for BTC and ETH longs and reached roughly $890 million across BTC, ETH, XRP and SOL. The familiar “buy the rumor, sell the news” dynamic also figures prominently, with anticipatory inflows sometimes followed by aggressive profit-taking once the Fed publishes guidance, producing abrupt post-announcement corrections.
Beyond Fed policy, the market remains exposed to inflation prints, geopolitical shocks and regulatory developments — each a potential trigger for abrupt reassessment of risk. Lower rates increase liquidity but do not eliminate sensitivity to macro surprises or shifts in Fed forward guidance; even a muted or ambiguous statement can produce sharp downside moves. Observers note that institutional adoption and whale accumulation are constructive but do not remove systemic vulnerability to rapid sentiment reversals.
