In the early hours of this Thursday, it is not the rate cut itself that will determine the direction of risk assets.

This Thursday (Beijing time), the Federal Reserve will announce its final rate decision of the year. Market expectations are highly aligned:

According to CME FedWatch data, the probability of a 25 basis point rate cut exceeds 85%.

If realized, this would be the third consecutive rate cut since September, bringing the federal funds rate down to the 3.5%-3.75% range.

For crypto investors accustomed to the “rate cut = bullish” narrative, this sounds like good news.

But the issue is, when everyone expects a rate cut, the cut itself is no longer a driving force for the market.

Financial markets are expectation machines. Prices reflect not “what happened,” but “what happened relative to expectations.”

An 85% probability means the cut is already fully priced in; when the announcement comes early Thursday morning, unless there’s a surprise, the market is unlikely to react much.

So what is the real variable?

The Fed’s stance on next year. A 25 basis point cut is basically certain, but how long the easing cycle can last and how many more cuts in 2025—these are what the market is really betting on.

Early Thursday morning, the Fed will also update its forecast for the future rate path, and this forecast often has more impact on market direction than the immediate rate cut decision.

But this time, there’s an additional issue: even the Fed itself may not see things clearly.

The reason is that from October 1 to November 12, the US federal government was shut down for 43 days. During that time, statistical agencies suspended work, resulting in the cancellation of the October CPI release, and the November CPI was postponed to December 18, a full week after this week’s FOMC meeting.

This means that Fed officials are missing the last two months of inflation data as they discuss the rate outlook.

When decision-makers themselves are feeling their way in the dark, their guidance will be more ambiguous, and ambiguity often means greater market volatility.

Let’s first look at this week’s timeline:

We can analyze specifically what kinds of signals the Fed might send and how the market might react in each scenario.

Betting on Next Year’s Expectations

After every FOMC meeting, the Fed releases a “Summary of Economic Projections.”

In it, there’s a chart showing all Fed members’ expectations for future interest rates.

Each member marks a dot at where they think the year-end rate should be. Since it looks like a bunch of scattered dots, the market calls it the “dot plot.” You can find all past dot plots on the Federal Reserve’s official website.

Below is the dot plot released at the September 17 FOMC meeting.

It shows both division and consensus within the Fed. If the dots are clustered together, it means members are aligned and the policy path is clear;

If the dots are widely scattered, it means there’s disagreement and the future is full of uncertainty.

For crypto markets, uncertainty itself is a risk factor. It suppresses risk appetite and makes capital more likely to stay on the sidelines rather than enter the market.

From the chart, you can see the 2025 dots mainly cluster in two areas: about 8-9 dots around 3.5%-3.625%, and 7-8 dots around 3.75%-4.0%. This shows the committee is split into two camps:

One side thinks there should be 1-2 more cuts this year, the other thinks there should be a pause or just one more cut. The median is about 3.6%, meaning the majority baseline expectation is for two more cuts in 2025 (including this week’s).

Looking at 2026, the Fed members’ differences are even greater.

The current rate is 3.75%-4.00%. If it drops to around 3.4% by year-end 2025, that means only 1-2 cuts for the year. But from the chart, some members think it should go down to 2.5% (equivalent to 4-5 cuts), while others think it should stay at 4.0% (no cuts at all).

Within the same committee, the most aggressive and most conservative expectations differ by space for six rate cuts. This is a “highly divided” Federal Reserve committee.

This division is a signal in itself.

If even the Fed can’t agree internally, the market will naturally “vote with its feet.” Currently, traders are betting more aggressively than official guidance. CME FedWatch shows the market is pricing in 2-3 rate cuts for 2026, while the official dot plot median shows only one.

So, to some extent, this Thursday’s FOMC meeting is a “face-off” between the Fed and the market: will the Fed move closer to market expectations, or stick to its own pace?

Three Scenarios, Three Reactions

Based on current information, this week’s FOMC could go in roughly three directions.

1. The most likely scenario is “in line with expectations”: a 25bp cut, dot plot maintains the guidance from last September’s meeting, and Powell repeatedly emphasizes “data dependence” at the press conference without giving a clear direction.

In this case, the market will see little volatility. The cut is priced in, guidance is unchanged, and there are no new trading signals. The crypto market will likely follow US stocks with mild fluctuations before returning to its previous trend.

This is also the baseline expectation for most Wall Street institutions, including recent reports from Goldman Sachs and Raymond James.

2. The next most likely scenario is “dovish”: a 25bp cut, but the dot plot shows two or more cuts in 2026, and Powell’s tone is soft, emphasizing labor market risks over inflation risks.

This is equivalent to the Fed moving closer to market expectations and confirming an easing path. The dollar weakens, boosting USD-denominated assets, and improved liquidity expectations lift market sentiment. BTC and ETH may rebound with US stocks, with the former possibly testing recent highs.

3. A less likely but possible scenario is “hawkish”: despite a 25bp cut, Powell emphasizes sticky inflation and hints at limited room for cuts next year, or there are multiple dissenting votes, showing resistance to further easing within the committee.

This is essentially telling the market “you’re being too optimistic”—the dollar strengthens, liquidity expectations tighten, and risk assets come under pressure. The crypto market could see a short-term pullback, especially for high-beta altcoins.

However, if it’s just a hawkish tone rather than a real policy shift, the drop is usually limited, and it could even become a buying opportunity.

Normally, the Fed would adjust the dot plot based on the latest data. But this time, due to the government shutdown, they’re missing two months of CPI and must make judgments with incomplete information.

This brings several knock-on effects. First, the reference value of the dot plot itself is discounted; even committee members are unsure, so the dots may be more scattered.

Second, Powell’s press conference carries more weight, and the market will search every word for direction. If the dot plot and Powell’s tone are inconsistent, the market will be more confused, and volatility may increase.

For crypto investors, this means early Thursday’s price action may be harder to predict than usual.

Rather than betting on direction, it’s better to focus on volatility itself. When uncertainty rises, controlling position size is more important than betting on up or down.

Tonight’s Job Openings Data Isn’t as Important as You Think

So far, we’ve discussed Thursday’s FOMC, but tonight (Tuesday, Beijing time, 23:00)), another data point will be released: JOLTs.

Social media sometimes hypes it up as very important, like “quietly deciding liquidity trends,” etc. But honestly, JOLTs isn’t highly weighted among macro data. If you’re short on time, just focus on Thursday’s FOMC;

If you want more background on the labor market, read on.

JOLTs stands for Job Openings and Labor Turnover Survey. It’s released monthly by the US Bureau of Labor Statistics (BLS) and measures how many positions US companies are hiring for, how many hires are made, and how many separations occur.

The most watched metric is “job openings”: the higher the number, the stronger the hiring demand and the tighter the labor market.

At its 2022 peak, this number exceeded 12 million, meaning companies were scrambling for workers and wages were rising rapidly, making the Fed worry about inflation. Now it’s dropped to about 7.2 million, basically back to pre-pandemic normal levels.

Image source: Jinshi Data

Why is the importance of this data probably overrated?

First, JOLTs is a lagging indicator. Today’s release is for October, but it’s already December. The market cares more about timely data, like weekly initial jobless claims and the monthly non-farm payrolls report.

Second, the expected job openings figure of around 7.1 million isn’t “overheating.” Some analysts noted that in August, the ratio of job openings to unemployed persons fell below 1.0, meaning there is now less than one opening per unemployed worker.

This is completely different from the 2022 situation, when there were two openings per unemployed person. The “overheated” labor market narrative is actually long outdated.

According to forecasts from LinkUp and Wells Fargo, tonight’s October JOLTs is likely to be around 7.13-7.14M, not much different from the previous 7.2M.

If the data meets expectations, the market will hardly react; it just confirms the existing narrative that “the labor market continues to cool slowly” and won’t change anyone’s Fed expectations.

Tonight’s data is more like an “appetizer” before the FOMC, with the real “main course” coming early Thursday.

What Will Happen to My BTC?

The previous sections were about macro data, but you probably care more about this: how will all this affect my BTC and ETH?

In short, it will have an impact, but it’s not as simple as “rate cut = price increase.”

The Fed’s rate decisions affect crypto through several channels.

First is the dollar. A rate cut means lower yields for dollar assets, so capital looks elsewhere. When the dollar weakens, USD-denominated assets (including BTC) often perform better.

Second is liquidity. In a low-rate environment, borrowing is cheaper and there’s more money in the market, some of which flows into risk assets. The 2020-2021 bull market was largely driven by the Fed’s unlimited QE.

Third is risk appetite. When the Fed sends dovish signals, investors are more willing to take risks, shifting capital from bonds and money market funds to stocks and crypto; conversely, hawkish signals send funds back to safe assets.

These three channels make up the transmission chain: “Fed policy → USD/liquidity → risk appetite → crypto assets.”

In theory, BTC now has two popular identities: “digital gold” or “risk asset.”

If it’s digital gold, it should rise during market panic and be negatively correlated with stocks. If it’s a risk asset, it should rise and fall with the Nasdaq, and perform well when liquidity is loose.

In reality, over the past few years, BTC has looked more like the latter.

According to CME research, since 2020, BTC’s correlation with the Nasdaq 100 jumped from near zero to about 0.4, and sometimes even exceeded 0.7. The Kobeissi Letter recently pointed out that BTC’s 30-day correlation once reached 0.8, the highest since 2022.

But recently, an interesting phenomenon has emerged. According to CoinDesk, over the past 20 days, BTC’s correlation with the Nasdaq has dropped to -0.43, showing a clear negative correlation.

Data source: https://newhedge.io/

Nasdaq is just 2% below its all-time high, but BTC is down 27% from its October high.

Market maker Wintermute explains this as follows: BTC currently has a “negative skew”—when stocks fall, it drops even more, but when stocks rise, it’s slow to react. In their words, BTC “shows high beta only in the wrong direction.”

What does this mean?

If this week’s FOMC sends a dovish signal and US stocks rise, BTC may not rebound in tandem; but if it’s hawkish and stocks fall, BTC could drop even harder. This is an asymmetric risk structure.

Summary

After all this, here’s a framework for ongoing monitoring.

What to watch this week (( Dec 9-12)?

The key is early Thursday’s FOMC. Watch for three things: whether the dot plot changes (especially the 2026 median rate expectation), whether Powell’s press conference tone is dovish or hawkish, and whether there are multiple dissenting votes.

What to watch in mid-to-late December?

The November CPI will be released on December 18. If inflation data rebounds, the market may reprice next year’s rate cut expectations, challenging the “continued easing” Fed narrative.

What to watch in Q1 2026?

First, the Fed Chair transition—Powell’s term ends in May 2026.

Second, the continued impact of Trump’s policies. If tariff policies expand, it could further boost inflation expectations and limit the Fed’s easing space.

Also, keep an eye on whether the labor market deteriorates more rapidly. If layoffs start to rise, the Fed may be forced to accelerate rate cuts, which would be a whole new scenario.