Today, on December 19, the crypto market saw a slight increase as investors capitalized on lower prices following the Bank of Japan’s interest rate increase and favorable consumer inflation data from the U.S.
Summary
- A potential risk to the current crypto market rally has been raised by John Williams.
- He stated that he does not foresee the necessity for additional interest rate cuts in 2026.
- Additional risks include the bearish flag pattern and recent rate hikes from the Bank of Japan.
The price of Bitcoin (BTC) increased to $88,000, with the total market capitalization of all cryptocurrencies reaching $2.97 trillion. Notable gainers included Bitcoin Cash, Zcash, and Morpho.
Concerns arise for the crypto market rally following a warning from a Fed official regarding interest rates.
The current rebound in the crypto market may face challenges as John Williams, president of the New York Federal Reserve, indicated he does not see a need for further interest rate action despite recent economic data.
A report from the Bureau of Labor Statistics on Tuesday indicated that the unemployment rate rose to 4.6% in November, marking the highest level in several years.
Conversely, another report revealed that the headline Consumer Price Index (CPI) fell to 2.6% in November, while core inflation, excluding volatile food and energy prices, decreased to 2.7%. Inflation rates may continue to decline as crude oil prices stay under the $60 support threshold.
Theoretically, lowering inflation and rising unemployment should trigger further interest rate cuts. However, Williams remarked:
“I don’t personally have a sense of urgency to need to act further on monetary policy right now, because I think the cuts we’ve made have positioned us really well.”
This statement followed a week after the Federal Reserve reduced interest rates and signaled plans to increase rates only once in 2026. According to Polymarket data, the likelihood of two cuts next year stands at 22%.
Historically, Bitcoin and the broader crypto market perform well during periods of interest rate reductions and other accommodative monetary policies, such as quantitative easing.
Bank of Japan Interest Rates Pose a Risk
One additional risk that could jeopardize the crypto market rally is the recent decision by the Bank of Japan to implement its first interest rate hike in 11 months, increasing the benchmark rate to 0.75%, the highest in three decades.
Critically, the bank suggested it may pursue further rate hikes next year contingent on continued economic growth.
Typically, risk assets like cryptocurrencies and equities tend to lag when the Bank of Japan raises rates.
The rate hike had been anticipated, with expectations climbing to 99% on Polymarket prior to the announcement.
Bitcoin Price Exhibiting a Risky Pattern
A further concern for the crypto market is that the Bitcoin price has developed a bearish flag pattern, characterized by an inverted flagpole and a channel resembling a flag.
Currently, Bitcoin’s price remains below all moving averages and the Supertrend indicator, implying a potential bearish breakdown towards the critical support level at $80,468. A fall below this level could lead to further decline, potentially down to the ultimate support at $75,000.
