The potential for a ‘Santa’ rally in Bitcoin could be driven by favorable macroeconomic conditions, particularly the upcoming decision on interest rates by the Federal Reserve. However, negative investor sentiment might be further impacted by any hawkish comments from central bank officials.
According to Coinbase Institutional, enhanced liquidity conditions and increasing chances of a Federal Reserve interest rate cut could stimulate a recovery in the crypto market throughout December.
“We believe that crypto is positioned for a December rebound as liquidity strengthens, Fed cut probabilities rise to 92% (as of Dec 4), and macroeconomic support grows,” reported Coinbase in a research report from Friday.
In October, Coinbase had anticipated “weakness” in the crypto market leading up to a “December turnaround,” based on its customized global M2 money supply index, which tracks the total amount of fiat currency in circulation.
Yet, market sentiment continues to be largely influenced by fear, with both institutional and retail investments remaining “reluctant to engage,” leaving markets uncertain ahead of a potential increase in exchange-traded fund (ETF) inflows, as stated by Coinbase.
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Fed interest rate cut critical for Bitcoin’s performance in early 2026
Market analysts have also pointed out the likelihood of a “Santa rally” following any rate cut by the Fed—this pattern typically sees assets gain short-term value around the Christmas period.
The outlook for Bitcoin (BTC) in Q1 of 2026 may significantly depend on comments from Federal Reserve Chair Jerome Powell, according to Nic Puckrin, a crypto analyst and co-founder of the educational platform Coin Bureau. He commented to Cointelegraph:
“Should the Fed cut rates on December 10th and end quantitative tightening, there’s little holding back a Santa rally for Bitcoin—unless a major geopolitical event occurs.”
“However, investors will be closely analyzing Jerome Powell’s statements during the press conference for clues regarding 2026 monetary policy, as any hawkish tone could dampen the rally,” he added.
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Other analysts have linked the selling pressure on Bitcoin in November to Powell’s earlier hawkish remarks, yet they remain optimistic about a recovery in December. This perspective includes insights from Chris Kim, co-founder and CEO of Axis, a quantitative trading firm managing $100 million in capital.
“Overall, we’re leaning toward a recovery,” given that the “primary factor at play right now is macro,” Kim mentioned to Cointelegraph, adding:
“From a technical point of view, the market has already tested the ~$80k level and the 100-week average. We’re also observing positive developments like Vanguard permitting ETF trading.”
An additional fundamental factor for crypto assets is the increasing speculation regarding National Economic Council Director Kevin Hassett possibly becoming the next Federal Reserve Chair in early 2026, which could signal a “notably more dovish” policy approach, according to Kim.
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