The dust has settled! The Federal Reserve's 2025 ultimate rate cut, is the crypto market迎来新转折？

Coordinated Universal Time (UTC) December 11, early morning, the Federal Reserve announced its final interest rate decision for 2025, lowering the federal funds rate target range by 25 basis points from 3.75%—4.00% to 3.50%—3.75%. This is the third consecutive rate cut since September and the sixth since the start of the current easing cycle in September 2024.

Following the announcement, Bitcoin prices fluctuated sharply between $94,400 and $92,700, while Ethereum also oscillated within the $3,340 to $3,440 range. This rate cut, priced in advance by the market, is reshaping liquidity expectations and risk appetite in the cryptocurrency market in complex ways.

01 Core of the Decision: Within-Expectations Rate Cut and Divergence from Expectations

The Federal Reserve’s December 2025 interest rate decision has shifted market focus from “whether to cut rates” to “how to cut” and “what the future path will be.” Ultimately, the Fed announced a 25 basis point rate cut, as widely expected.

This decision lowered the federal funds rate target range to 3.50%—3.75%, completing a total cut of 75 basis points this year.

What truly attracted market attention was the internal disagreement revealed in this decision. Of the 12 members of the Federal Open Market Committee, 9 supported the 25 basis point cut, but 3 voted against it. Two members believed the benchmark interest rate should remain unchanged, while one favored a larger cut of 50 basis points.

This is the first time since September 2019 that three officials voted against the majority in the same meeting, highlighting differing assessments within the Fed regarding the current economic conditions and monetary policy outlook.

02 Signal Interpretation: Dot Plot and Powell’s Cautious Tone

Beyond the rate adjustment itself, markets are more concerned with the Fed’s guidance on future policy. The latest dot plot indicates that Fed officials expect only one more 25 basis point rate cut possibly in 2026.

This forecast aligns with the outlook from September, implying the Fed views the pace of rate cuts next year as likely to slow significantly.

Federal Reserve Chairman Powell maintained a cautious tone at the post-meeting press conference. He explicitly stated that the committee sees both upside risks to inflation and risks of unemployment rising as objective concerns. Regarding inflation, Powell specifically mentioned that widespread and high tariffs implemented by the Trump administration are one of the factors pushing inflation higher.

It is noteworthy that the Fed adjusted its description of the labor market in the statement, removing the phrase “relatively low” regarding the unemployment rate, and instead pointing out that “downward risks to employment have increased in recent months.” Meanwhile, the statement maintained the view that inflation remains “at a relatively high level.”

03 Liquidity Operations: Initiation of $40 Billion US Treasury Purchases

In addition to the rate decision, the Fed announced a key liquidity operation: starting December 12, over the next 30 days, it will purchase $40 billion in US Treasuries to maintain ample reserve supplies.

This move has been termed “QE-lite” by market analysts, similar to the US Treasury bond purchase program implemented by the Fed at the end of 2019.

The Fed explained in the statement that reserve balances have fallen to comfortable levels and will purchase short-term government bonds as needed to sustain ample reserve supplies. This liquidity injection is especially important for the crypto market, as a more accommodative dollar liquidity environment generally benefits risk assets.

04 Market Reactions: Cryptocurrency Volatility and US Stocks Closing Higher

After the rate decision, financial markets showed a divergence in reactions. The three major US stock indices closed higher: Dow up 1.05%, Nasdaq up 0.33%, and S&P 500 up 0.67%. Meanwhile, the US dollar index fell further below 99, and US Treasury yields edged lower.

The cryptocurrency market experienced the typical “buy the rumor, sell the news” pattern. Bitcoin fluctuated sharply after the announcement, trading between $93,200 and $91,700. Ethereum also showed clear volatility, with trading ranges from $3,340 to $3,440.

Other major cryptocurrencies, including Solana, XRP, and BNB, also exhibited similar oscillations. This price behavior reflects market interpretations of the Fed’s “hawkish rate cut” stance—welcoming the rate cut itself but being disappointed by its cautious future path.

Major Cryptocurrencies’ Reactions to the Fed Decision

05 Impact on Crypto Markets: Liquidity, Leverage, and Institutional Behavior

The Fed’s rate decision impacts the crypto market far beyond surface-level price movements. From a microstructure perspective, rate cuts and Treasury purchase programs directly influence liquidity conditions in the crypto space.

When the Fed improves banks’ reserve management and increases Treasury purchases, traders find it easier to handle large-scale crypto transactions. This reduces short-term financing pressures, expands market makers’ quoting ranges, and essentially improves market liquidity depth.

For high-leverage altcoin markets, such liquidity changes are especially significant. When short-term dollar liquidity loosens, arbitrage desks tend to increase exposure to riskier tokens because borrowing costs decrease and exit strategies seem clearer.

Conversely, when liquidity tightens or volatility spikes after Fed speeches, altcoins often experience larger percentage losses, as forced deleveraging initially hits smaller markets.

Institutional investors’ behavior is also directly affected by Fed policies. Low rates reduce the opportunity cost of holding non-yielding crypto assets, but if the Fed’s actions only lower rates without broader liquidity improvements, institutional allocations may remain cautious.

06 Future Outlook: Divergent Trends and Key Watchpoints

Looking ahead to the crypto market post-Fed decision, analysts have proposed different potential paths. CryptoQuant analysts suggest that if the Fed adopts a clearer dovish stance and Bitcoin breaks through key resistance levels at $99,000 and $102,000, a rebound could extend to $112,000.

However, today’s “pause” tone in the Fed statement may complicate this outlook. 21Shares’ crypto investment expert David Hernandez is more optimistic, viewing today’s rate cut as a “lifeline for Bitcoin,” with cheaper funds bringing new capital into the system. Historically, much of this capital eventually flows into the crypto markets.

For traders, key future indicators include signals on quantitative tightening or easing, reserve management, and special liquidity tools. These signals inform market infrastructure whether it can support large-scale crypto trading.

Participants should also monitor financing markets, options skew, dealer inventories, and macroeconomic forecasts. These microstructure signals often provide early warning of whether Fed actions will lead to a genuine risk-on environment or merely a temporary repricing.

Future Outlook

After the announcement, the CME FedWatch Tool shows that markets assign a higher probability that the Fed will keep rates unchanged at the January 2024 policy meeting. The probability of a 25 basis point cut by March 2024 stands at 40.7%, while the chance of holding rates steady is 52%.

Bitcoin remains above $90,000, with market sentiment indices rebounding slightly from pre-decision levels of 24 (panic mode). As 2025 approaches its end, this “hawkish rate cut” from the Fed may set the tone for next year’s crypto market: improved liquidity but cautious pace, opportunities alongside risks.

The crypto world is learning to move beyond simple celebration of each basis point cut, focusing instead on analyzing changes in liquidity “pipelines”—perhaps the real mechanism through which Fed policies influence digital asset prices.