Bitcoin surges to $94,000! Beware of Fed hawkish rate cuts killing the "Christmas rally"

On the eve of the Federal Reserve’s interest rate meeting, the cryptocurrency market saw a strong rebound. On December 10, the price of Bitcoin briefly surpassed $94,000, rising nearly 4% within 24 hours. Major altcoins such as Ethereum, XRP, and Solana also rallied in tandem. However, market sentiment was mixed with significant caution: despite widespread expectations that the Fed would cut rates by 25 basis points, traders grew increasingly worried that Powell might use the opportunity to deliver a “hawkish” signal, suggesting a pause in easing at the January meeting next year. Analysts warn that if this scenario materializes, Bitcoin’s much-anticipated “Christmas rally” may fail to materialize, and hopes of reclaiming the $100,000 mark by year-end could become slim.

Celebration on the Eve of the Meeting: Bitcoin Leads the Rally, Market Holds Its Breath

Just before a critical macro moment, cryptocurrencies demonstrated their inherent volatility and resilience. On December 10, Bitcoin surged from an intraday low of $89,500 to a high of $94,000, driving the total crypto market capitalization back above $3.18 trillion. Ethereum, XRP, and Solana posted even more impressive gains, signaling a return of risk appetite in the market.

The timing of this rally is particularly delicate, directly linked to the Federal Reserve’s upcoming rate decision to be announced the next day (December 11). According to the CME FedWatch tool, the market is pricing in a 90% probability of a 25 basis point rate cut by the Fed—this would be the third expected rate cut this year. Historically, expectations of monetary easing typically benefit risk assets, including cryptocurrencies, which is one of the fundamental logics behind the rebound. In addition, the U.S. Commodity Futures Trading Commission (CFTC) recently launched a pilot program allowing Bitcoin, Ethereum, and USDC to be used as collateral in derivatives markets. This move, which enhances the utility and institutional acceptance of crypto assets, has also helped support market sentiment.

However, the rebound was accompanied by intense long-short battles. On-chain data shows that over the past four hours, as prices rose, a total of $289 million in positions were liquidated, with as much as $265 million from short positions. This reveals strong short squeeze forces behind the rally, but also means a significant amount of leverage has been cleared, removing some obstacles for the market’s next move.

The Specter of a “Hawkish Rate Cut”: Will the Fed Throw Cold Water on the Market?

Although a rate cut is almost certain, the biggest cloud hanging over the market is not “whether to cut,” but “how to cut.” The core issue in current market trading has shifted from expectations of the rate cut itself to speculation about the Fed’s future policy path. Increasingly, traders are concerned that the Fed may deliver a “hawkish rate cut”—that is, cutting rates while using Chair Powell’s press conference to signal continued concern about sticky inflation, and hinting that the move is more of a “calibration” than the start of an easing cycle, with a pause possible in January.

These concerns are evident in prediction markets. Data from Polymarket shows that contracts betting on Powell’s comments being “hawkish” are increasing. If this scenario unfolds, it would deal a heavy blow to risk assets. Coin Bureau analyst Nic Puckrin stated bluntly: “If Powell does deliver a hawkish speech, the chances of a Christmas rally for Bitcoin will decrease.” The market would interpret this as monetary easing being less aggressive and sustained than expected, dampening speculative enthusiasm.

A more far-reaching impact would be to deepen the divergence between Bitcoin and traditional equities. So far this year, Bitcoin has dropped around 2%, while the S&P 500 Index has gained 16%, marking the most severe divergence between the two since 2014. If the Fed sends a hawkish signal, it could further reinforce this “decoupling,” disappointing investors hoping for crypto to follow stocks in a “Christmas rally.”

Current Long/Short Market Factors and Key Expectation Data

Short-Term Bullish Factors:

• Fed Expectations: 90% probability of a 25 basis point rate cut priced in.
• Policy Innovation: CFTC approves Bitcoin and Ethereum as collateral for derivatives.
• Market Structure: Perpetual contract funding rates are extremely low or negative, leverage is low, and a large number of shorts have been liquidated.
• Technical Pattern: Rebound from the $83,000 low may have built a stronger market bottom.

Short-Term Bearish/Risk Factors:

• Macro Risk: The Fed may deliver a “hawkish rate cut,” dampening risk appetite.
• Cost Pressure: The average cost for investors who bought over the past six months is about $103,000, creating strong resistance and a “sell the rally” mentality.
• Lack of Momentum: Since the $126,000 high in October, Bitcoin’s rebound momentum has remained weak.
• Institutional Expectation Downgrade: Standard Chartered slashed its year-end Bitcoin target from $200,000 to $100,000.

Key Market Expectation Data:

• Probability of reaching $100,000 this year (Polymarket): 49%
• Probability of reaching $105,000 this year (Polymarket): 24%

Analyst Divide: Will the Year-End “Christmas Rally” Arrive as Expected?

Faced with a complex situation, market analysts are clearly divided. The cautious camp believes it is not wise to chase the rally at this point. Compass Point analyst Ed Engel points out that Bitcoin is trading near the upper end of the recent $81,000–$94,000 range, and breaking out here requires extra caution. He emphasizes that the cost basis for investors who entered over the past six months is around $103,000. When the price is below this level, investors are more likely to “sell into rallies” rather than “buy the dip,” creating strong overhead resistance.

Institutions such as Standard Chartered have also sharply lowered their expectations. The bank’s head of digital asset research, Geoff Kendrick, cut the year-end Bitcoin target from $200,000 to $100,000, and slashed the 2026 target from $300,000 to $150,000. This adjustment reflects a reassessment of short-term market momentum by mainstream financial institutions.

However, optimists see hope in the market’s microstructure. GSR’s global head of OTC trading, Spencer Hallarn, believes the current market structure actually lays a bullish foundation for a “Christmas rally.” He notes that Bitcoin’s drop to the $83,000 low likely “shook out” many weak-handed bulls and established a solid base of skepticism. At the same time, extremely low or even negative perpetual contract funding rates indicate low leverage, reducing selling pressure and supporting a healthy rise. Hallarn suggests that the year-end market “looks good” and could break out further to the upside.

Looking Ahead to 2026: Policy Changes May Become the Biggest Catalyst

Regardless of how the year-end rally plays out, many analysts are already looking ahead to the more certain 2026. A potential major catalyst is brewing: a change in Federal Reserve leadership. Current Chair Powell’s term ends in May 2026, and the market broadly expects that if Trump is re-elected, he will appoint a more dovish new chair.

Currently, former White House Council of Economic Advisers Chair Kevin Hassett is seen as the leading candidate, and is considered by the market to be “super-dovish” and friendly to the crypto industry. Coin Bureau’s Nic Puckrin predicts: “With super-dove Kevin Hassett seeming the most likely to succeed Powell next year, the market could quickly switch from stagnation to frenzy in 2026.” Expectations of much looser monetary policy could become the core narrative driving the next crypto bull market.

Therefore, the current market volatility and battles may be seen as the final shakeout and positioning phase before a new cycle begins. Short-term traders are focused on every word from the Fed, while long-term investors may already be preparing for a potential paradigm shift in macro policy mid-next year.