Liquidity gate opening imminent: The Fed's three major rate decision scenarios and the life-and-death test for the crypto market

FOMC’s Three Crossroads

In the early morning of December 11th in the UTC+8 time zone, the Federal Reserve will hold its final interest rate meeting of the year. Market consensus is almost certain—the federal funds target range will likely be lowered by 25 basis points from 3.75%-4.00% to 3.50%-3.75%, completing the third rate cut since September.

But the real concern is not whether there will be a rate cut, but the policy stance behind this decision. Internal committee members are clearly divided: one side believes that weakening employment data and rising recession risks require further easing; the other side is fixated on core inflation still being above the 2% target and advocates maintaining high interest rates to prevent a price rebound. This opposition has been exacerbated during the data vacuum period (when government shutdown delays key economic data releases), making policy communication more difficult.

The Prelude of October and the Current Dilemma

Looking back at the October meeting, the Fed simultaneously implemented a rate cut and halted balance sheet reduction. On the surface, this appeared dovish, but was cooled down by Chair Powell’s repeated emphasis that a December rate cut is not guaranteed—he openly disclosed strong dissent within the committee. As a result, the dollar and U.S. Treasury yields rose, while stocks and cryptocurrencies surged then quickly retraced.

Today, officials’ voices remain mixed: the New York Fed President supports continued adjustments, while Boston and Kansas City Fed officials repeatedly warn of sticky inflation risks. Goldman Sachs expects this dot plot to slightly revise upward the interest rate levels beyond 2026, implicitly signaling that this rate cut should not be viewed as the start of a new easing cycle.

Three Fates Facing Bitcoin

Bitcoin has retraced about 30% from its October high and is currently oscillating around $90,000. ETF inflow momentum has clearly slowed, and some institutions have begun to lower their expectations. The outcome of this FOMC meeting will determine the future direction.

Scenario 1 (Most Likely): Cautiously Hawkish Rate Cut
The rate is expected to be lowered by 25 basis points as anticipated, but the dot plot’s description of future rate cuts remains cautious, with Powell emphasizing data dependence. In the short term, the market may buy into the rate cut itself, and Bitcoin might challenge resistance near previous highs. However, as long-term U.S. Treasury yields stabilize or even slightly rise, actual interest rates could rebound, making a sustained upward trend less likely. The shift in liquidity expectations will be a key variable.

Scenario 2 (Small Probability Surprise): Clearly Dovish Rate Cut
In addition to the rate cut, the dot plot significantly lowers the median of mid-term interest rates, implying more than two rate cuts beyond 2026, with official statements reinforcing ample reserve commitments. This effectively signals another rate cut and liquidity easing, which is highly beneficial for all long-term assets. Bitcoin, after stabilizing around $90, could challenge the $100,000 psychological barrier. Ethereum and mainstream DeFi and Layer 2 protocols might outperform due to on-chain liquidity returning.

Scenario 3 (Risk Scenario): Maintaining High-Interest Rate Expectations
The Fed may choose to pause rate cuts or, despite a rate cut, significantly revise upward the long-term interest rates, reducing the space for future cuts and signaling prolonged high rates. The dollar and Treasury yields would strengthen, putting pressure on all assets without cash flows. Bitcoin, having experienced a correction and marginal funding slowdown, could face technical risks of seeking new support levels downward. High-leverage altcoins are more vulnerable to liquidation.

Pace and Key Nodes

The FOMC decision night has historically followed a similar rhythm. The first hour after the announcement is the most intense in terms of sentiment and liquidity, with volatile but unstable price movements; the true trend only becomes clearer after the press conference, dot plot, and economic projections are fully digested, gradually revealing itself over the next 12-24 hours.

The rate decision determines the current pace, while the direction of liquidity is likely to decide the second half of this cycle.