Bitcoin's Prospects: IG’s Chief Analyst Anticipates Recovery Following Fed Rate Cut

Summary: Bitcoin and the wider crypto market are currently experiencing challenges, but Chris Beauchamp, IG’s Chief Market Analyst, believes a recovery might be on the horizon. He anticipates a rebound as traders prepare for a likely cut in Federal Reserve interest rates this week.

Key Takeaways

Bitcoin has faced significant losses lately, dropping from an all-time high to around $90,211 currently.
A Federal Reserve rate cut is expected soon, which could positively influence the crypto market.
There is strong market consensus on the likelihood of the Fed cutting rates, with many economists supporting this view.
Lower interest rates typically encourage investment in higher-risk assets like cryptocurrencies.

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Recent Bitcoin Struggles

Bitcoin's difficulties began after its impressive peak of $126,272 in October. After this, the cryptocurrency began to decline, ending October with a loss of 3.95% and is now trading at approximately $90,211. The situation worsened in November when Bitcoin fell by an additional 17.5%, marking its most severe monthly decline since February 2025. This slump contributed significantly to a broader market downturn, with the global crypto market value falling from $4.27 trillion in October to $3.08 trillion, resulting in a staggering loss of $1.19 trillion over two months.

Anticipation of a Rate Cut

Despite the recent downturn, Beauchamp is optimistic about a potential recovery. He emphasizes the upcoming Federal Open Market Committee meeting scheduled for December 9-10, which could lead to the Fed’s final policy decision of 2025.

There is strong market sentiment suggesting that the Fed will lower interest rates once more. Having already cut rates by 25 basis points in both September and October, the target range currently sits at 3.75%-4.00%. A further reduction could bring this down to 3.50%-3.75%.

The data supports this prediction; the CME FedWatch Tool indicates an 89.5% likelihood of a rate cut in December, significantly up from 30% in November. Moreover, futures markets reflect an 86% probability of this outcome, confirming widespread expectations.

CME FedWatch Tool

Economists largely share this perspective. A recent Reuters poll of 108 economists revealed that 89 anticipate another rate cut, as the Fed responds to a cooling labor market. Major financial institutions also present similar forecasts. For example, T. Rowe Price predicts rates may drop to 3% or less next year as labor conditions weaken, while Morgan Stanley has adjusted its outlook to expect a 25-basis-point cut in December.

JPMorgan forecasts cuts in both December and January, while Bank of America expects a December reduction followed by additional cuts in 2026. Economists at Berenberg suggest that the recent uptick in unemployment may have prompted a shift towards easing.

Lower Rates and Market Liquidity

In light of these favorable odds, Beauchamp argues that lower interest rates typically rejuvenate interest in riskier assets, especially once significant pullbacks occurred, creating more appealing buy opportunities. He noted that Bitcoin and Ethereum attracted buyers during recent weekend declines, indicating the market could be approaching a short-term bottom. Should the Fed proceed with a December rate cut, it might restore momentum after the severe downturn following Bitcoin’s record high in October.

However, there is some internal disagreement within the Fed. Minutes from the October meeting revealed a considerable divide among policymakers, with several members opposing further cuts. Fed Chair Jerome Powell is navigating a complex situation, balancing internal pressures with external economic challenges. He mentioned that limited data caused by the temporary government shutdown complicated decision-making in October, likening it to "driving through fog."

Currently, inflation remains above the Fed’s target of 2%, a trend persisting since March 2021. Economists predict that the Personal Consumption Expenditures index will stay above this target through 2027.

Disclaimer: This article provides information and should not be construed as financial advice. The opinions expressed herein are the author’s own and do not necessarily represent The Crypto Basic's views. Readers should conduct their own thorough research before making any investment decisions. The Crypto Basic assumes no responsibility for any financial losses experienced.