Bitcoin has seen a tumultuous downswing in the last few months, falling from record $120,000 price levels down to as low as $82K. With the leading cryptocurrency presently changing hands at $84,000, the coin is now down 14% YTD, leading a bearish crypto market caused by a rocky 2025 US economy.
Analysts are looking for catalysts to send BTC back towards the $100k price level, ideally by the end of this year. One that could provide that spark lies in the hands of the Federal Reserve: whether or not the Central Bank will decide to cut interest rates again.
Could a Rate Cut Help Bitcoin Reclaim the $100k Price?
Several investment firms forecast the Fed to cut interest rates again following last month’s rate cut. However, the recent record-breaking US Government shutdown that lasted over 40 days could put a wrinkle in that forecast. The Fed has rolled out two interest rate cuts in 2025, with the most recent cut in October.
Federal Reserve Chair Jerome Powell’s speech after the October rate cut also suggested that we may not see further interest rate reductions in 2025, and the recent shutdown and limiting of key government data could be the deciding factor in whether or not we get another cut.
Also Read: Fed At Odds About Dec. Rate Cut: Where Does Crypto Stand?
Often, interest rate cuts are considered bullish as they often lead to a spike in risky investments, as borrowing becomes easier. However, the recent interest rate cut came with a warning from Powell, which may have led to a cryptocurrency market correction. In his speech, Powell noted that job gains have slowed and employment risks have risen in recent months. He also stated that inflation “has moved up since earlier this year and remains somewhat elevated.“
On the other hand, a bullish flag emerged at the end of this past week, via New York Fed President John Williams. The Fed representative told the Wall Street Journal there is still “room for a further adjustment” to interest rates in the near term — a clear hint that a December rate cut is back on the table. Per CME’s FedWatch Tool, the probability of a 25 bps cut in December has jumped to 70%, up from just 39% on Thursday. Should a rate cut come, Bitcoin and other cryptocurrencies could see a price boost to end a mixed 2025.