Fed Rate-Cut Odds Rise to 71%, Yet Bitcoin May Drop Further — Here’s Why

Bitcoin (BTC) has seen an almost 8% increase since last Friday, rebounding from recent lows around $80,500. This surge coincides with a rise in market expectations for a Fed rate cut in December.

Key Takeaways:

Bitcoin has seen an increase of nearly 8%, recovering from lows around $80,500.
Market expectations for a Federal Reserve rate cut in December have risen to 71%.
On-chain data shows significant exchange outflows, indicating potential accumulation.
However, analysts caution against heightened volatility and the possibility of further corrections.

The recovery aligns with capitulation among short-term holders and one of the most significant spikes in Bitcoin's exchange outflows, igniting optimism for continued growth. However, some analysts caution that a correction may still be ahead.

Growing Confidence in a Shift in Monetary Policy

Bitcoin has been on a downward trend since early October, bringing it to multi-month lows. On November 21, the coin fell to $80,522, a price point not seen since late April.

Currently, BTC shows signs of a slight recovery. Data from BeInCrypto Markets indicates that BTC was priced at $86,947 at the time of this writing, up 1.07% from the previous day.

Bitcoin (BTC) Price Performance. Source: BeInCrypto Markets

Charles Edwards, founder of Capriole Fund, mentioned that the volatility seen in tech stocks—and subsequently Bitcoin—is largely due to the market's fluctuating expectations regarding a rate cut.

At the beginning of November, traders were leaning towards a 90% probability of a rate cut in December. Although those chances dipped to 30%, they have improved again to over 70%. Edwards stated,

“As the market reverts, expect that it will carry Bitcoin somewhat higher.”

As per the CME FedWatch Tool, the market is currently pricing in a 71% chance of a 25-basis-point cut at the Federal Reserve's December 10 meeting. This comes after a 25-basis-point reduction in October, bringing rates to a range of 3.75% to 4.00%, marking the Fed's second reduction of 2025.

Odds of a Fed Rate Cut in December. Source: CME FedWatch Tool

Additionally, the central bank announced it would end its quantitative tightening on December 1, 2025. Together, these developments indicate increasing liquidity and lower borrowing costs, which are likely to boost demand for risk assets like Bitcoin.

Bitcoin Approaches a Possible Market Turning Point

In addition to broader economic factors, on-chain data suggests that Bitcoin might be nearing a bottom. Analyst Quinten François highlighted a significant increase in BTC being moved off exchanges, a trend typically interpreted as a positive indicator of market sentiment.

"Exchange outflows just registered one of the largest spikes in history. Every major outflow event on this chart has marked the beginning of a significant upward movement," François stated.

Swissblock Technologies has also noted a significant change in its Risk-Off Signal, which has seen a noticeable decline—suggesting that the worst of the capitulation phase may be concluding. This further supports the notion that Bitcoin could be in the early stages of creating a new bottom.

“If we use Risk-Off as a bottoming guide, this coming week is critical. We need to witness a continued decline in selling pressure. Often, a second, weaker selling wave—while holding previous low prices—can serve as a reliable bottoming signal. This phase usually indicates seller exhaustion and a shift in control back to the bulls,” the post read.

Bitcoin Risk-Off Signal. Source: X/Swissblock

Another analyst pointed out a significant divide between long-term and short-term Bitcoin holders. According to Binary CDD, long-term holders have gradually sold coins during market strength, with spikes of activity correlating to local or macro cycle peaks. This indicates profit-taking began before the market correction.

Short-term holders, however, are experiencing deep capitulation. SOPR readings show that these investors have been selling at ongoing losses, creating a noticeable capitulation band below 1.0.

“Although this does not indicate an imminent reversal, the cleansing of weaker hands paired with absorption around lower accumulation zones suggests a market transition to an accumulation phase,” he reported.

This combination of long-term holders distributing at market highs and retail capitulation at lows generally signals the later stages of a correction. However, analyst CryptoDan warned,

“When considering the overall picture through combined long- and short-term SOPR, the current movement can be interpreted in two ways: ‘If the situation is a correction phase, then this is the bottom.’ ‘If it is a bear cycle, the end of the decline is still distant.’ We need to stay open to both possibilities and respond as necessary.”

Potential for Another Bitcoin Correction

Despite these cautiously optimistic on-chain signals, analysts warn that Bitcoin may still encounter increased volatility in the near term. Crypto Rover pointed out that the open CME gap created over the weekend remains unfilled and added that nearly all CME gaps from the past five months have been closed, with 95% filled within seven days.

$BTC has a CME gap around the $85,300 level.

Most CME gaps fill within a week, so prepare for a correction.

CME gap update

Meanwhile, analyst Ted Pillows cautioned that if Bitcoin doesn't reclaim the $88,000–$90,000 range soon, the price could potentially drop towards another monthly low.

While Bitcoin exhibits early signs of stabilization supported by improving macroeconomic conditions and positive on-chain trends, the market still faces uncertainty. A recovery may be on the horizon, but the presence of key resistance levels and the unfilled CME gap leaves the door open for another short-term correction.