Rising Yields and a Breaking Downtrend: What the Fed's Final 2025 Decision Means for Bitcoin's Path to $100K

The Federal Reserve's December 2025 rate decision has become a focal point for investors navigating the intersection of macroeconomic policy and crypto markets. With a 25-basis-point rate cut priced in at 88% probability, the Fed's final move of the year will test whether Bitcoin can break its year-long downtrend and reclaim $100,000. This analysis unpacks the interplay between rising Treasury yields, institutional positioning, and risk-on/risk-off dynamics to assess Bitcoin's trajectory.

The Fed's Dovish Dilemma: Rate Cuts vs. Hawkish Caution

The Fed's December 10 decision is expected to lower the federal funds rate to 3.5%–3.75%, marking the third consecutive cut since September 2024. While this dovish shift should theoretically boost risk assets, the market's mixed signals-rising 10-year Treasury yields to 4.15%-suggest lingering skepticism. This divergence highlights a critical tension: rate cuts inject liquidity into the system, weakening the dollar and reducing the opportunity cost of holding non-yielding assets like Bitcoin. However, rising yields imply investors are pricing in a slower pace of easing, or even a pause in 2026, a scenario that could trigger a risk-off response.

The Fed's internal divisions further complicate the narrative. Governor Christopher Waller and others advocate for continued cuts, while officials like Susan Collins and Austan Goolsbe cautions against overstimulation. If the FOMC deadlocks, Chair Jerome Powell's potential tiebreaker vote could sway the outcome. Powell's press conference following the decision will be pivotal; any hint of a "hawkish pause" could cap Bitcoin's upside, as seen in late 2025 when a sudden flip in rate-cut expectations triggered a 6% selloff.

Bitcoin as a Macro Asset: Yields, Liquidity, and Institutional Demand

Bitcoin's evolution into a macro asset is now undeniable. From 2020 to 2025, its price has shown a strong correlation with Treasury yields, inflation, and institutional positioning. The end of quantitative tightening (QT) on December 1-a 400 billion liquidity pivot-has already begun to reshape the landscape. By shifting to Reserve Management Purchases (RMP), the Fed will reinvest maturing securities into Treasury bills, effectively increasing global liquidity. This aligns with Bitcoin's historical relationship with M2 money supply, suggesting a potential bull move in early 2026.

Institutional adoption has also accelerated. Bitcoin's $1.65 trillion market cap now accounts for 65% of the global crypto market, driven by spot ETF approvals and corporate purchases like MicroStrategy's $962.7 million acquisition at $90,615. These moves underscore Bitcoin's role as a strategic hedge against currency debasement, particularly as core inflation remains above 2%. However, rising Treasury yields-driven by expectations of tighter policy-could dampen this demand if investors perceive Bitcoin as a high-beta asset rather than a safe haven.

Risk-On/Risk-Off Dynamics: The Fed's Guidance as a Tipping Point

The December meeting's forward guidance will determine whether Bitcoin's rally gains traction. A dovish outcome-signaling a clear path for 2026 rate cuts-would likely trigger a risk-on environment, with Bitcoin benefiting from dollar weakness and lower real yields. Conversely, a hawkish pause-emphasizing inflation risks-could reignite risk-off sentiment, as seen in October 2025 when Trump's rare earths tariff threats drove a $19 billion liquidation event.

Historical patterns reinforce this sensitivity. In late 2025, Bitcoin rebounded above $92,000 as rate-cut expectations rose, but volatility persisted due to conflicting data on inflation and employment. The key variable remains Powell's messaging: a dovish tilt could validate Bitcoin's role as a "digital gold" play, while a hawkish pivot would force investors to reassess its beta to traditional markets.

The Path to $100K: A Macro-Driven Outlook

Bitcoin's ability to reach $100K hinges on three factors:
1. Fed Policy Clarity: A definitive rate-cutting path in 2026 would reduce the dollar's appeal and boost Bitcoin's relative value.
2. Institutional Momentum: Continued ETF inflows and corporate adoption will sustain demand, even amid short-term volatility.
3. Global Liquidity Trends: The Fed's RMP program and Japan's bond market instability could amplify Bitcoin's appeal as a liquidity hedge.

While the December cut is a tailwind, Bitcoin's trajectory will ultimately depend on whether the Fed's guidance aligns with market expectations. A dovish outcome could see Bitcoin test $100K by year-end, but a hawkish pause may keep it range-bound until 2026.

Conclusion: Navigating the Fed's Final Act

The Fed's December 2025 decision is more than a technical adjustment-it's a macroeconomic inflection point for Bitcoin. Rising Treasury yields and institutional positioning suggest a delicate balance between risk-on optimism and risk-off caution. Investors must closely monitor Powell's messaging, the updated Summary of Economic Projections (SEP), and global liquidity shifts to gauge Bitcoin's path forward. For now, the $90K support level remains a critical psychological barrier, but the interplay of macro forces and institutional demand could yet propel Bitcoin toward $100K.