Federal Reserve Policy Shift Breathes Life into Bitcoin as Q4 Downturn Softens

Bitcoin’s near-term technical picture is brightening following a dramatic reversal in monetary policy expectations. The Federal Reserve’s planned halt to quantitative tightening on December 1, combined with surging rate-cut probabilities now priced at 70% for December, has injected fresh optimism into a market battered by four consecutive weeks of losses—the steepest quarterly decline since 2018, totaling -24.43%.

The cryptocurrency, currently valued around $87.64K (+2.03% weekly), has crawled back from its November 21 nadir of $82,100. This recovery, while modest, coincides with a notable shift in market microstructure. On-chain metrics reveal that the aggregate spot bid-ask delta at 10% depth has climbed to its second-highest point this year, a harbinger of institutional and retail dip-buyers stepping back into the market. Historical precedent suggests such surges often precede significant upside moves—notably, an identical signal in March-April preceded a 64% bull run.

Market Sentiment vs. Structural Support

Sean Dawson, head of research at Derive, cautions against misreading the current bounce as a turnaround. “Pessimism has peaked, but I’d be careful of walking into a bull trap,” he warns, highlighting structural headwinds that persist despite improved sentiment. Digital asset treasuries remain underwater on a net asset value basis, constraining accumulation capacity, while both spot Bitcoin and Ethereum ETF flows continue bleeding outflows—a divergence between fund flows and price action worth monitoring closely.

The inflation narrative complicates the Fed’s path forward. Even as rate-cut expectations soar, persistent price pressures may delay aggressive quantitative easing, leaving traders vulnerable to sudden reversals in risk appetite.

Where Bitcoin Goes From Here

Dawson’s base case envisions Bitcoin briefly testing the mid-to-high $70,000 zone before stabilizing around $90,000 by year-end, contingent on the Fed maintaining its current dovish trajectory. For 2026, he projects recovery toward $100,000 by Q1, though year-end 2025 remains a minefield of volatility.

Options markets are pricing in significant downside hedging, with traders heavily positioning put contracts expiring in December across the $80,000-$85,000 range. This configuration suggests the market is bracing for one final capitulation before any sustained recovery takes hold.

The December Catalyst Ahead

All roads lead to December 10, when the Federal Reserve announces its next rate decision. This date, combined with the December 1 quantitative tightening terminus, will likely determine whether Bitcoin’s current rebound has genuine legs or represents yet another bear market false flag. Until then, extreme fear sentiment—while improving—keeps the cryptocurrency in precarious territory, vulnerable to any unexpected policy signals or macroeconomic data surprises.