Bitcoin Slumps Below $86K as Fed Uncertainty Weighs on Crypto Market

Bitcoin remains under pressure as the broader cryptocurrency market struggles to recover from a brutal week of losses. The original cryptocurrency briefly dipped below $86,000 on Monday morning before steadying slightly. Institutional adoption and regulatory progress have done little to offset the selling pressure, with traders warning that the market remains vulnerable to further declines according to Bloomberg analysis.

The Federal Reserve's upcoming December meeting is now a key focal point for the crypto market, as shifting expectations for rate cuts have driven volatility. The probability of a 25 basis point rate cut has surged to 71%, a significant jump from a week ago. However, recent comments from Fed officials have highlighted growing internal divisions, complicating market narratives.

Bitcoin's sensitivity to macroeconomic conditions has intensified this year, with recent selloffs directly linked to fading expectations of rate cuts. A compelling forecast from XWIN Research Japan suggests Bitcoin could trade between $60,000 and $80,000 through year-end, contingent on the Fed's decision. If the central bank maintains current rates, the report argues, Bitcoin may consolidate in this range for the remainder of 2025.

Why the Standoff Happened

The uncertainty around the Fed's next move has created a tug-of-war among market participants. On one side, investors are betting that rising unemployment and softening inflation could push the Fed to cut rates. On the other, hawkish officials remain cautious, arguing that premature easing could reignite inflationary pressures. This division has been amplified by the recent government shutdown, which delayed the release of October employment data, leaving policymakers without key metrics to guide their decision.

The absence of reliable labor data has forced the Fed into a more data-dependent approach. Historically, rate cuts follow confirmed signs of economic deterioration rather than forecasts. The prolonged delay has shifted the market's assumptions from a near-certain pivot to a much more uncertain outcome, with some investors now pricing cuts into early 2026.

What Analysts Are Watching

Analysts are closely monitoring how the Fed's policy stance interacts with broader macroeconomic trends. XWIN Research Japan's forecast highlights the role of stablecoin reserves, which have hit record highs, indicating latent buying power in the market. If macroeconomic conditions improve and the Fed follows through with a rate cut, these reserves could fuel a significant rally in Bitcoin and other digital assets.

Bitcoin's technical indicators also suggest a potential rebound if the $85,200 support level holds. However, traders note that the market remains highly dependent on macroeconomic signals. Any unexpected developments could delay rate cuts, such as a stronger-than-expected jobs report, and prolong the current slump.

Risks to the Outlook

Despite the cautious optimism surrounding the potential for a rate cut, several risks remain. The Fed's internal divisions mean that policy action is far from guaranteed. Even if labor data weakens, the lack of a unified front among policymakers could result in a prolonged pause, pushing rate cuts further into 2026.

Additionally, the broader market environment remains fragile. Rising Treasury yields, tightening liquidity conditions, and increased volatility in both equities and crypto suggest that a recovery may take longer than anticipated. Institutional investors have been reducing exposure to high-risk assets, and on-chain data indicates that long-term holders are beginning to sell into weakness rather than absorb supply. This trend is likely to continue as the Fed delays easing.

For Bitcoin investors, the key takeaway is the importance of liquidity conditions. While long-term fundamentals for the crypto market-such as institutional adoption and ETF inflows-remain intact, short-term price movements are heavily influenced by macro liquidity and monetary policy. If the Fed delays easing, the path to capital inflows into digital assets may be slower and more volatile. This remains a critical factor for investors to monitor.