Fed Easing and the Crypto Rebound: Is Bitcoin's Upside Now Justified?

The Federal Reserve's December 2025 rate cut and its broader balance-sheet expansion have reignited debates about Bitcoin's potential for a sustained rebound. While the immediate market reaction to the rate cut was muted-traders noted the move had already been largely priced in-according to market analysis-the Fed's incremental policy shift toward liquidity injection may yet provide fertile ground for risk assets like Bitcoin in 2026. This analysis examines whether macroeconomic tailwinds and on-chain fundamentals justify renewed optimism for Bitcoin's upside, or if caution is warranted amid emerging bearish signals.

Macroeconomic Tailwinds: Fed Easing and Risk-On Sentiment

The Fed's decision to cut rates in December 2025, coupled with its announcement to begin purchasing $40 billion in Treasury bills monthly, marks a pivotal shift in monetary policy. This balance-sheet expansion, while modest compared to post-2008 interventions, is seen as a structural support for equities and cryptocurrencies. As stated by a report from Forbes, the move signals a "Fed bombshell" that could catalyze broader market risk-on sentiment, particularly for assets like Bitcoin that have increasingly mirrored equity market dynamics in 2025.

Bitcoin's correlation with equities has strengthened this year, with its price performance now more closely tied to macroeconomic expectations and interest rate trajectories. According to Reuters, this alignment suggests that Bitcoin's future trajectory may depend less on isolated policy announcements and more on the Fed's sustained accommodative stance. For instance, while the December rate cut failed to move Bitcoin's price significantly, the broader implication of a Fed committed to expanding its balance sheet could create a "floor" for risk assets, particularly as inflationary pressures ease and growth expectations stabilize.

On-Chain Sentiment: A Mixed Picture of Strength and Speculation

On-chain metrics in 2025 paint a nuanced picture of Bitcoin's fundamentals. The Network Value to Transactions (NVT) ratio-a key metric for assessing valuation relative to network usage-reached a "golden cross" of 1.51, indicating strong usage-backed valuation and suggesting the asset is fairly valued relative to its utility. The NVT ratio reached a "golden cross" of 1.51, indicating strong usage-backed valuation and suggesting the asset is fairly valued relative to its utility.

Meanwhile, 74% of Bitcoin's supply is now classified as illiquid, reflecting deep investor conviction and reduced sell-side pressure. Active addresses remain robust, with approximately 735,000 unique addresses participating daily, while transaction volumes hover around 390–400K per day, underscoring healthy network activity. According to on-chain analysis, active addresses remain robust, with approximately 735,000 unique addresses participating daily, while transaction volumes hover around 390–400K per day, underscoring healthy network activity.

Institutional adoption has also accelerated, with exchange-traded products holding over $175 billion in on-chain crypto assets. According to a 2025 report, institutional adoption has also accelerated, with exchange-traded products holding over $175 billion in on-chain crypto assets. This institutional buying, particularly through volatile periods like October 2025's market crash, has reinforced Bitcoin's role as a macro asset. As noted in the 2025 Q4 Tiger Research Bitcoin Valuation Report, institutions have treated corrections as consolidation opportunities, maintaining net inflows and signaling long-term confidence. According to the 2025 Q4 Tiger Research report, institutions have treated corrections as consolidation opportunities, maintaining net inflows and signaling long-term confidence.

However, bearish indicators are emerging. The NVT and MVRV (Market Value to Realized Value) ratios suggest overvaluation and speculative excess, while the Net Unrealized Profit/Loss (NUPL) metric dropped to 0.522-a level historically associated with corrections. According to Yield Fund analysis, the NVT and MVRV ratios suggest overvaluation and speculative excess, while the Net Unrealized Profit/Loss (NUPL) metric dropped to 0.522-a level historically associated with corrections. Additionally, the MVRV ratio of 2.3× and SOPR (Spent Output Profit Ratio) of ~1.03 indicate that long-term holders are realizing gains, but most transactions occur at or slightly above breakeven, hinting at a market balancing between profit-taking and accumulation. According to on-chain metrics, the MVRV ratio of 2.3× and SOPR (Spent Output Profit Ratio) of ~1.03 indicate that long-term holders are realizing gains, but most transactions occur at or slightly above breakeven, hinting at a market balancing between profit-taking and accumulation.

The Case for Caution: Structural Risks and Market Cycles

Despite these tailwinds, structural risks persist. The October 2025 crash revealed a market increasingly dominated by institutional players, who, while resilient, are not immune to profit-taking cycles. According to Yield Fund analysis, the five-wave Elliott Wave pattern suggests the current bull phase may be nearing its peak, with a potential bear market looming as institutions begin to lock in gains. This aligns with bearish on-chain signals, such as the NVT ratio's overvaluation warning and the NUPL's bearish crossover.

Moreover, Bitcoin's correlation with equities introduces new vulnerabilities. If macroeconomic conditions deteriorate or the Fed reverses its accommodative stance, Bitcoin could face downward pressure akin to traditional risk assets. This interdependence, while beneficial in bull cycles, amplifies downside risks in a bearish environment.

Conclusion: A Tenuous Balance of Opportunity and Risk

Bitcoin's upside in 2026 appears justified by the Fed's accommodative policies and robust on-chain fundamentals, but these gains are contingent on navigating emerging risks. The Fed's balance-sheet expansion provides a macroeconomic tailwind, while metrics like the NVT golden cross and institutional inflows underscore Bitcoin's growing legitimacy as a macro asset. However, overvaluation warnings, speculative excess, and institutional profit-taking cycles suggest caution.

For investors, the key lies in balancing optimism with prudence. While the Fed's easing and on-chain strength create a favorable backdrop, the market's structural shifts-toward institutional dominance and equity-like behavior-demand vigilance. Bitcoin's upside remains plausible, but its realization will depend on whether macroeconomic stability and on-chain fundamentals can outpace bearish momentum.