Will the Federal Reserve's interest rate cut, imminent as it is, allow Bitcoin and Ethereum to continue their upward trend?

The market is holding its breath. The Federal Reserve’s December interest rate decision on Tuesday has become the biggest focus in the cryptocurrency market in recent days. As the so-called “Shadow Chairman” Hasset recently stated, current economic data create ample conditions for further easing, with room for more than a 25 basis point cut, which sends a strong signal to the market.

Meanwhile, subtle changes in the labor market are being amplified and interpreted. Although U.S. job vacancies in October slightly increased to 7.67 million, hiring activity has cooled down, and the wave of resignations is intensifying. This contradictory phenomenon points to a core issue: the employment market is quietly cooling. After the unemployment rate broke above 4.4% in September, reaching a four-year high, the internal tilt within the Federal Reserve toward rate cuts has become an unstoppable trend.

Internal Power Balance of the Federal Reserve

The three Fed governors appointed by Trump—Boman, Mullan, and Waller—have clearly expressed support for a rate cut this month. The third figure, Williams, no longer hides his stance, implying that to balance employment goals with inflation targets, a rate cut has become necessary. Even the traditionally dovish Cook leans toward easing policies, suggesting that this month may see a rare “five to six” or “six to six” subtle deadlock.

The market’s real focus is not on “whether to cut rates,” but on “how to cut rates.” Analysts generally believe that Powell may adopt a “preemptive and reactive” strategy—first lowering interest rates by 25 basis points to release liquidity, then hinting at raising the easing threshold next year. This gradual approach can both soothe the market and leave room for future adjustments.

Cryptocurrency Assets Rise in Response

Benefiting from rising expectations of rate cuts and the gradual warming of liquidity, Bitcoin experienced its third consecutive day of gains on December 9, with a daily increase of 2.26%, currently trading around $92.64K. More notably, Ethereum performed even better—once surging over 8%, approaching $3,400, hitting a recent high. Since the start of this week, Ethereum’s cumulative increase has exceeded 10%, with a current trading price of $3.25K and a 24-hour increase of 2.84%.

Ethereum’s relative strength is attributed to two factors: first, institutional investors’ growing expectations for spot staking ETFs; second, renewed attention to the prospects of asset tokenization applications. In contrast, Bitcoin, although benefiting from liquidity improvements, shows a more moderate upward trend, reflecting a divergence in market risk assessments across different asset classes.

The Truth Behind the Liquidity Turnaround

The quantitative tightening cycle launched in June 2022 has withdrawn approximately $2.4 trillion in liquidity from the financial system—this scale is second only to the cycle from 2017 to 2019 in history. When the Fed officially halted QT on December 1, this more than two-year-long “bloodletting” process finally ended, and financial markets entered a relatively loose capital environment.

However, stopping quantitative tightening does not mean restarting quantitative easing. Behind the continued rise in global bond yields lies market doubts about the independence of the next Fed chair’s policies. If concerns in the bond market escalate further, the Fed may have to deploy QE tools to lower long-term borrowing costs, indirectly supporting risk assets.

Hidden Risks That Cannot Be Ignored

There is a subtle contradiction here: under the dual favorable conditions of rising rate cut expectations and the end of QT, U.S. Treasury yields continue to climb. This inverse movement indicates market concerns about deeper risks. Especially, the potential impact of the Bank of Japan raising interest rates on global carry trades could temporarily impact risk asset valuations.

Investors need to realize that even if the Fed ultimately decides to launch QE to lower long-term rates, the continued rise in yields before achieving this goal could exert ongoing pressure on cryptocurrencies, stocks, and other risk assets. Whether this rebound can evolve into a trend depends critically on the Fed’s subsequent policy pace and its ability to stabilize market expectations.

Ethereum Technical: Building a Bottom in Key Range

From the daily chart, Ethereum has entered a sustained recovery phase since November 21, successfully breaking through the $3,000 level. The overall upward momentum shows no signs of exhaustion, and it is expected to consolidate within the $3,000 to $3,600 range, using time to create space and build a solid foundation for mid-term upward movement.

Attention should be paid to the time window around December 12—by then, the Fed’s decision will have been announced, and market expectations will shift from “uncertain” to “certain,” potentially triggering a new directional move. In the short term, traders can consider positioning around the $3,000 support level, with $3,600 as a short-term resistance for risk management.