Fed's Diverging Views on 2026 Interest Rate Path May Continue to Impact Bitcoin and Crypto Market Performance

According to Odaily, the Federal Reserve has cumulatively cut interest rates three times in 2025, with the latest cut occurring on December 10, lowering the federal funds rate range to 3.5%–3.75%. However, the latest policy outlook shows that despite rates remaining at their highest levels since 2008, there may be only one more rate cut in all of 2026. The clear divergence within the Federal Reserve regarding the interest rate path is bringing ongoing uncertainty to bitcoin and the crypto market.

The report points out that the "dot plot" released by the Federal Reserve in December 2025 shows that policymakers are divided on the 2026 interest rate outlook, with roughly equal numbers of officials expecting no cuts, one cut, or two cuts. This divergence leaves the market lacking clear guidance as it heads into 2026. The current median forecast indicates that the interest rate will be about 3.6% at the end of 2025 and about 3.4% at the end of 2026, implying only one rate cut next year.

From a market expectations perspective, CME Group data shows that investors see only about a 20% probability of a 25 basis point rate cut by the Federal Reserve at the January meeting, while the probability of a rate cut at the March meeting rises to about 45%. Analysts generally believe that the labor market, inflation trends (especially the impact of tariffs), and overall economic growth will remain key variables influencing policy direction.

In addition, Federal Reserve Chairman Jerome Powell's term will end in May 2026, and the uncertainty over the selection of a new chair is also seen as a potential variable. Some analysts believe that after the new leadership takes office, a gradual easing path may continue, thereby providing support for risk assets in the mid-to-late stages.

From the industry perspective, some researchers expect that if the job market continues to weaken, the Federal Reserve may still implement two rate cuts in 2026 even if inflation rebounds temporarily; however, there is also a pessimistic scenario in which, if inflation rises again, rate cuts and liquidity injections may be forced to pause, potentially putting significant pressure on stocks and crypto assets.

The report concludes that compared to the market's previous optimistic expectations of a "full dovish turn," the Federal Reserve's current more cautious stance is weakening the pace of sentiment recovery in the crypto market. However, in the medium to long term, expectations of lower interest rates and leadership changes may still provide periodic benefits for bitcoin and other high-risk assets in the future. (Cointelegraph)