While the US government shutdown negatively impacts many sectors and institutions, including cryptocurrencies, the Fed is among those most affected.
This is because the Fed couldn’t access the economic data it bases its interest rate decisions on. Just as the government shutdown ended and data was expected to arrive, the BLS officially canceled the October Employment Report. Nonfarm payrolls data was included in the additionally delayed November report, which will be released on December 16th, following the FOMC meeting.
There is no October NFP report, and with November data not arriving on time, the Fed will make its December decision blindly.
At this point, the FED is priced in with 33.8% of interest rates cuts in December, while leaving them unchanged is priced in with 66.2%.
This situation brings up one question: “What could happen to Bitcoin if the FED doesn’t lower interest rates?”
How Will the Fed’s December Decision Affect Bitcoin?
CryptoQuant analyst with the nickname XWIN Research answered this question, but investors will not like it at all.
CryptoQuant analysts stated that if the Fed does not cut interest rates in December, Bitcoin could fall to between $60,000 and $80,000 by the end of the year.
The analyst noted that if the Fed keeps interest rates steady in December, the BTC price could trade in the $60,000-$80,000 range by the end of the year.
XWIN Research stated that without a rate cut, tightening pressure in global financial markets will continue and demand for risk assets will weaken.
Noting that Bitcoin tends to react sensitively to such macroeconomic changes, the analyst argued that interest rate cut expectations have diminished and the sharp decline experienced for risk assets in early November could be repeated.
“The Fed is entering its December meeting with limited visibility due to the lack of key economic data. The Fed is making a distinction.
If the Fed chooses not to cut interest rates, the logic is simple: inflation remains around 3%, officials are concerned about cutting rates too soon, and incomplete data makes policymakers more cautious. This scenario typically keeps liquidity tight and risk appetite low.
It also paints a negative picture for Bitcoin. When interest rate cut expectations faded in early November, risk assets sold off, sending Bitcoin plummeting. If the Fed remains cautious and holds interest rates steady in December, similar pressures could continue.
In this context, if the Fed does not cut interest rates in December, Bitcoin is likely to trade between $60,000 and $80,000 by the end of the year.
Conversely, the analyst also observed that stablecoin reserves on exchanges have reached an all-time high of $72 billion, suggesting that while market liquidity is sufficient for a rally, macroeconomic variables are currently limiting bullish momentum.
*This is not investment advice.