Fed’s Rate Cut Pause Could Slam Bitcoin Back to $70,000 in Q1

Central bank hesitation threatens crypto's bull run.

Watch the Fed, Not the Charts

Forget technical analysis for a minute. The biggest signal for Bitcoin's next move isn't on a candlestick chart—it's in a conference room at the Federal Reserve. If Jerome Powell & Co. hit the brakes on expected rate cuts, the resulting shockwave could send the flagship crypto tumbling right back to the $70,000 support zone. It's a stark reminder that for all its decentralization talk, crypto still dances to the old masters' tune.

The Liquidity Lifeline Gets Cut

Markets have been pricing in easier money. The narrative is simple: rate cuts mean cheaper dollars, and those dollars go hunting for yield in riskier assets like digital gold. Pull that narrative away, and the fundamental case for a continued rally weakens. Suddenly, holding volatile assets looks less appealing when cash starts earning a decent return again. Traders will reprice risk in a heartbeat.

A Test of True Conviction

A dip to $70,000 wouldn't be a catastrophe—it's a key psychological and technical level. But it would separate the true believers from the fair-weather speculators. It's the market's way of asking: do you trust the long-term thesis, or are you just here for the cheap-money party? A pullback here could actually build a healthier foundation for the next leg up, shaking out the weak hands. After all, nothing makes a traditional finance manager sweat like an asset class that doesn't obediently crash when the punch bowl is taken away.

The bottom line? Bitcoin's fate in early 2025 is tied to the oldest story in finance: the cost of money. The Fed holds the script.

In brief

• The crypto market enters 2026 amid uncertainty, despite several rate cuts operated by the Fed in 2025.
• Contrary to expectations, Bitcoin, Ether, and major assets declined instead of rebounding.
• The Fed adopts a wait-and-see stance and could suspend rate cuts as early as the first quarter of 2026.
• Fragile economic data and still uncertain inflation heighten market concerns.

The Fed hesitates, the crypto market wavers

On December 22, John Williams, President of the New York Federal Reserve, expressed a cautious position regarding the continuation of monetary policy.

Despite three consecutive 0.25% cuts made in 2025, including the latest one during this December, he stated he does not personally feel the need to intervene further on monetary policy for now, because he believes the cuts they have already made put them in a strong position.

This statement fits into a wait-and-see strategy, where the Fed seeks to avoid excessive easing. Williams emphasized the need for balance: he wants to see inflation drop to 2% without excessively harming the labor market. It’s a balancing act.

This signal of a pause in rate cuts comes in a context blurred by the consequences of the federal shutdown, which disrupted economic data collection. November inflation, announced at 2.63%, could have favored anticipation of more pronounced easing, but some economists, including Robin Brooks, believe these figures may be skewed.

Several factors explain the sector’s bearish reaction:

• Rates remain high despite cuts, fueling investor caution;
• The absence of a clear signal on monetary trajectory maintains uncertainty;
• Doubt about the reliability of inflation figures makes market expectations more difficult;
• Risk assets, including bitcoin, face sell-offs in the absence of solid catalysts.

Jeff Mei, Director of Operations at BTSE, summarizes the situation: “In this scenario, equities would waver, and crypto would get hit hard. Bitcoin could plunge to $70,000 as ETF outflows accelerate, and ethereum could dip to $2,400.” This hypothesis is less based on the Fed’s past decisions than on the uncertainty maintained around the continuation of the monetary schedule.

A discreet but potentially decisive easing

While attention is heavily focused on key rates, a more discreet development in US monetary policy could have major repercussions on the crypto market.

Since December 1, the Fed has officially ended its quantitative tightening (QT) policy by opting for full rollover of maturing securities. It simultaneously launched a program called Reserve Management Purchases (RMP), which plans to purchase about $40 billion of short-term Treasury bills.

Although the Fed does not officially label this measure as “quantitative easing”, some analysts speak of “stealth QE”, or stealth quantitative easing.

This indirect liquidity injection could prove favorable to risk assets, including cryptos, even in the absence of new rate cuts. By comparison, during the massive QE of 2020-2021, the Fed’s balance sheet expanded by about $800 billion per month, accompanying a crypto market surge of more than $2,900 billion.

Analysts believe that if RMPs continue in the first quarter of 2026, even at a moderate pace, this could favor a recovery of flows into the sector. Jeff Mei considers that “bitcoin could climb between $92,000 and $98,000”, supported by “inflows into ETFs exceeding $50 billion and continued institutional accumulation”. For Ethereum, he mentions a target of $3,600, stimulated by the progress of LAYER 2 scalability solutions and yields related to staking.

The price of Bitcoin is settling into a waiting phase, torn between macroeconomic uncertainties and conflicting technical signals. Faced with a cautious Fed and a market seeking direction, the trajectory of cryptos remains suspended on upcoming monetary decisions.

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