Bitcoin's Potential Rebound Amid December Fed Rate Cut Speculation

The Federal Reserve's December 2025 rate decision looms as a pivotal event for Bitcoin, with market odds of a 25-basis-point cut now hovering near 87% according to CME FedWatch data. This shift from earlier November expectations (around 40%) reflects a combination of dovish signals from Fed officials, a cooling labor market, and easing inflationary pressures. For Bitcoin, which has historically rallied during periods of monetary easing, the macroeconomic tailwinds and evolving market positioning suggest a compelling case for a rebound ahead of Chair Jerome Powell's December 1 speech.

Macroeconomic Tailwinds: Rate Cuts and Liquidity Inflows

The Fed's pivot toward rate cuts has already begun. After the September 2024 cut brought the federal funds rate to 3.75%-4.00%, a December reduction to 3.50%-3.75% would align with broader trends of monetary stimulus. This trajectory mirrors the 2020 and 2024 cycles, where Bitcoin surged during periods of Fed easing. For instance, the 2020 election year saw Bitcoin rise from $11,000 to $69,000 as rate cuts and fiscal stimulus fueled risk-on sentiment.

Current conditions are even more favorable. The U.S. job market has weakened slightly, with the Fed's Beige Book noting "moderate inflation" and "slight weakening" in employment. Meanwhile, core PPI growth has decelerated to its lowest level since July 2024, reducing pressure on the Fed to maintain restrictive rates. These factors, combined with delayed economic data due to the recent government shutdown, have created a fog of uncertainty-favorable for risk assets like Bitcoin.

Market Positioning: Open Interest and Leverage Reset

Bitcoin's derivatives market has undergone a significant reset, creating a more balanced environment for a potential rebound. Open interest in Bitcoin derivatives has fallen from an October peak of $46 billion to $28 billion over 52 days, signaling a liquidation of excessive leverage. This drop has erased speculative long positions that previously amplified volatility, reducing the risk of cascading liquidations. On-chain metrics now show a neutral trend, suggesting a stabilization in market sentiment.

Leverage ratios, however, remain a double-edged sword. While Q3 2025 saw leverage as high as 125:1 on platforms like Hyperliquid, Q4 has seen moderation in extreme leverage, albeit with 1,001:1 ratios still present. The November selloff, which erased $20 billion in liquidations, highlighted the fragility of leveraged positions but also demonstrated institutional resilience. Net inflows into Bitcoin spot ETFs hit $7.8 billion in Q3 and continued into Q4, with entities like MicroStrategy (MSTR) and Abu Dhabi's Mubadala Investment Company accumulating Bitcoin despite the drawdown.

Technical Indicators and Institutional Sentiment

Bitcoin's price action reinforces the case for a rebound. After correcting to $80,553 in November, the asset has rebounded to $91,000, with key resistance forming between $93,000 and $96,000. A break above this range could target $100,000–$108,000, while a failure to hold $88,000 risks a retest of $80,000. The Relative Strength Index (RSI) has broken out from a corrective trend line, hinting at a potential breakout.

Institutional confidence is also growing. Stablecoin supply has hit a record $160 billion, a precursor to major Bitcoin rallies historically. New ETFs for XRP and Dogecoin launched by Grayscale and Bitwise, further signal institutional re-entry into crypto. Analysts from 4E Lab and Matrixport note that the return of large institutional investors and a more stable capital environment are key drivers of the current bullish outlook.

Risks and the Path Forward

While the case for a Bitcoin rebound is strong, risks remain. The Fed's final decision will hinge on incoming inflation and jobs data, which are delayed due to the government shutdown. A surprise hawkish pivot could trigger a short-term selloff. Additionally, Bitcoin's correlation with the Nasdaq and other risk assets means broader market jitters could spill over.

However, the macroeconomic and structural factors-easing monetary policy, reduced leverage, and institutional inflows-create a fertile environment for Bitcoin to capitalize on a Fed rate cut. With Powell's December 1 speech likely to clarify the Fed's stance, the coming weeks will be critical for both macroeconomic clarity and Bitcoin's price trajectory.