The United States Federal Reserve (Fed) unveils its last monetary policy decision of the year this Wednesday, December 18, and a new rate cut of 25 bps is expected. Will this be enough to allow Bitcoin to experience its traditional Christmas rally?
The Fed should not spoil the party this Wednesday, December 18
It is therefore this year 2024 which saw the pivot of Western Central Banks and in particular the pivot of the Fed on Wednesday September 18 with a jumbo Fed cut of 50 bps, followed by a rate cut of 25 bps on Wednesday, November 7. These more accommodating monetary conditions have facilitated the upward trend in the price of Bitcoin.
The Fed therefore pivoted this year to 2024, putting an end to a monetary tightening campaign to break the out-of-control upward dynamic of US inflation. Note that monetary policy remains restrictive despite everything (the neutral rate is between 2.90 and 4% according to economists).
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The year 2024 also saw the reduction of the Fed's balance sheet and the reduction in the overall level of liquidity, which did not prevent risky assets from having a bullish year in 2024, the US equity market and the cryptocurrency market.
This Wednesday, December 18, the FED unveils its last monetary policy decision of the year and it should, barring any unpleasant surprises, lower the interest rate on its federal funds by an additional 25 bps.
The barometers which make it possible to project immediate action by the Fed indeed give the green light, in particular the FedWatch tool from the Chicago Stock Exchange (CME) and the technical analysis of the 2-year US bond rate.
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If we look at the macroeconomic objectives that the Fed had set for the end of the year, they generally authorize a rate cut of 25 bps this Wednesday, December 18, with an unemployment rate close to the alert threshold of the Fed and nominal inflation at the target of 2.3% according to the PCE inflation index.
The only point of doubt is the level of the underlying PCE which is at 2.8% against a target established at 2.6% by the Fed's monetary policy committee.
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The Fed should therefore not spoil the party with its monetary choice of December 18, but the mass has not yet been said on the side of updating macro projections.
High finance needs confirmation of the Fed's confidence regarding disinflation, growth and employment in 2025, as well as the Fed cut pace planned for next year.
Graph showing the evolution of the US federal funds interest rate and the evolution of the Fed's balance sheet
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The second part of December is favorable for Bitcoin in terms of seasonality
The last 2 weeks of December benefit from favorable seasonality for Bitcoin, that is to say a largely positive average performance since 2021.
If Bitcoin follows its usual seasonality, it should therefore be able to exceed $100,000 by the end of year holidays.
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Another approach, that of the repetition of past Bitcoin cycles, also confirms this point of view with a second part of December which saw bullish impulses on the cycles of 2016 and 2020.
Chart that proposes a “cycle repeat” approach by comparing the current cycle with the previous two cycles on a calendar basis adjusted to the current cycle
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Investments in cryptocurrencies are risky. There is no guaranteed high return, a product with high return potential involves high risk. This risk-taking must be in line with your project, your investment horizon and your capacity to lose part of this savings. Do not invest if you are not prepared to lose all or part of your capital
Vincent Ganne is a recognized expert in technical analysis with 18 years of experience. He frequently speaks on BFM Business and produces exclusive analyzes for Cryptoast Research. Drawing on his extensive experience, Vincent offers a holistic approach to financial markets, taking into account macroeconomic events and using many aspects of graphical analysis to forecast trends in Bitcoin and other cryptocurrencies in the medium to long term. He also held the position of Senior Market Analyst & Business Development Manager for 3 years at TradingView, strengthening his in-depth knowledge of financial markets.
Vincent Ganne
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