Bitcoin's Post-Thanksgiving Rally: Fed Rate Cuts and the Path to Risk-On Rebound

The Federal Reserve's November 2025 rate decision, which cut the federal funds rate by 25 basis points to a range of 3.75–4.00%, marked a pivotal shift in monetary policy expectations for 2026. This move, aligned with market forecasts, has reignited speculation about further easing, with financial markets pricing in an 80% probability of another 25 basis point cut at the December 2025 meeting. Such a trajectory, if realized, would set the stage for a risk-on environment in early 2026-a dynamic that could significantly benefit assets like Bitcoin, which thrive on liquidity expansion and accommodative monetary conditions.

The Fed's Easing Cycle and Risk-On Momentum

The Federal Reserve's forward guidance suggests a continuation of rate cuts into 2026, with J.P. Morgan Global Research projecting two additional reductions in 2025 and one more in early 2026, bringing the target rate to approximately 3.4% by year-end. This dovish trajectory is driven by a combination of factors: a weakening U.S. labor market, with rising layoffs and slowing hiring, and persistent inflationary pressures that have kept policymakers cautious about over-tightening. However, political pressures from the White House to accelerate easing could push the Fed toward even more aggressive cuts, potentially driving the policy rate below 3% by late 2026.

Historically, rate cuts have acted as a tailwind for risk-on assets. Lower interest rates reduce the opportunity cost of holding non-yielding assets like Bitcoin and encourage capital reallocation from cash and bonds into equities and cryptocurrencies. This dynamic was evident in late 2024 and early 2025, when initial Fed easing spurred Bitcoin's rally to record highs. However, the market's reaction to the September 2025 rate cut was muted, as the move had already been largely priced in. The December decision, by contrast, carries higher stakes: if the Fed delivers a surprise cut or signals a faster-than-expected easing path, it could catalyze a renewed surge in Bitcoin prices.

Bitcoin's Volatility and the December 2025 Pivotal Moment

Bitcoin's performance in late 2025 has been marked by sharp volatility. Despite the Fed's easing, the asset fell nearly 30% from its October peak, driven by fragile liquidity conditions in crypto markets and regulatory uncertainty. This underscores a critical nuance: while rate cuts create favorable conditions for risk-on assets, Bitcoin's price action is also influenced by sector-specific factors such as institutional adoption, regulatory developments, and macroeconomic risks like trade tensions or geopolitical shocks.

The December 2025 meeting, however, could serve as a turning point. With the FOMC scheduled to meet on December 9–10, markets are closely watching for signals on the pace of 2026 cuts. A 25 basis point reduction, coupled with forward guidance indicating three or more cuts in 2026, would likely boost risk appetite and drive capital into Bitcoin. Analysts at J.P. Morgan have revised their outlook to anticipate a December cut, while others suggest that a dovish outcome could push Bitcoin toward the $95,000–$110,000 range by year-end, assuming macroeconomic conditions stabilize.

Risks and Uncertainties

Despite the bullish case, several risks could temper Bitcoin's post-Thanksgiving rally. First, the Fed's December decision remains uncertain: while markets price in an 80% chance of a cut, a surprise hold could trigger a short-term selloff. Second, broader macroeconomic factors-such as a sharper-than-expected rise in inflation or a global economic slowdown-could force the Fed to pivot toward hawkish rhetoric, dampening risk-on sentiment. Finally, regulatory headwinds, particularly in the U.S., remain a wildcard. The SEC's ongoing enforcement actions and the potential for new licensing requirements for crypto exchanges could create friction for Bitcoin's institutional adoption.

Conclusion: A Delicate Balance of Optimism and Caution

The Federal Reserve's December 2025 meeting represents a critical inflection point for Bitcoin's trajectory in 2026. A well-telegraphed rate cut, combined with a clear easing path, could reignite risk-on momentum and drive Bitcoin higher. However, the market's reaction will depend on how well these cuts are priced in and whether broader macroeconomic conditions align with the Fed's projections. Investors should remain vigilant to both the opportunities and risks inherent in this environment, balancing optimism about liquidity-driven rallies with caution regarding regulatory and macroeconomic headwinds.