Bitcoin's ‘Santa’ rally may be ignited by macroeconomic tailwinds, including the Federal Reserve’s incoming interest rate decision, but fearful investor sentiment may take another hit by any hawkish remarks from central bank officials.
Improving liquidity conditions and rising odds of a Federal Reserve interest rate cut may catalyze a recovery in the crypto market during December, according to Coinbase Institutional.
“We think crypto could be poised for a December recovery as liquidity improves, Fed cut odds jump to 92% (as of Dec 4), and macro tailwinds build,” wrote Coinbase in a Friday research report.
In October, Coinbase predicted “weakness” in the crypto market ahead of a “December reversal,” based on its custom global M2 money supply index, which measures the total outstanding fiat currency supply.
Still, market sentiment remains “dominated” by fear, as institutional and retail capital remain “hesitant to step in,” leaving markets in limbo ahead of a recovery in exchange-traded fund (ETF) inflows, Coinbase said.
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Fed interest rate cut decisive for Bitcoin’s momentum in early 2026
Market analysts also flagged the possibility of a “Santa rally” following the Fed’s rate cut — a market pattern in which assets see short-term gains around Christmas.
Bitcoin's (BTC) prospects for the first quarter of 2026 may hinge more on the remarks of Federal Reserve Chair Jerome Powell, according to Nic Puckrin, crypto analyst and co-founder of Coin Bureau educational platform. He told Cointelegraph:
"If the Fed cuts rates on December 10th, along with ending QT, there's little standing in the way of a Santa rally for Bitcoin - bar any major geopolitical bombshell.”
“However, investors will scrutinise Jerome Powell’s every word during the press conference to get a glimpse into 2026 monetary policy, and any hawkishness could put a lid on the rally,” he said.
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Other analysts attributed Bitcoin's November sell pressure to Powell’s previous hawkish remarks, but expect a recovery in December. They include Chris Kim, co-founder and CEO of Axis, an onchain quantitative trading fund managing $100 million in live capital.
“Overall, we’re leaning toward a recovery,” as the “biggest driver right now is macro,” Kim told Cointelegraph, adding:
“From a technical perspective, the market has already retested the ~$80k region and the 100-week average. We’re also seeing incremental positives such as Vanguard allowing ETF trading.”
Another fundamental driver for crypto assets is growing speculation that National Economic Council Director Kevin Hassett will be appointed the next Federal Reserve Chair in early 2026, a move that would usher in a “notably more dovish” policy stance, according to Kim.
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