Cryptocurrencies Pull Back Against the Trend Amid Rate Cut Expectations: Is a $120,000 Bitcoin High Still Possible?

The current CME “FedWatch” tool shows an 87% probability of a 25-basis-point rate cut in December, fueling expectations of global liquidity easing. However, the cryptocurrency market is behaving unusually, with Bitcoin experiencing sharp volatility between $87,800 and $91,000, and total liquidations across the network reaching $350 million. This “expected positive news but a counter-trend pullback” phenomenon has sparked heated debate: Can Bitcoin break through to a new $120,000 high in the coming weeks? To grasp the market’s direction, it’s crucial to clarify the core contradiction between the logic of rate cuts and the abnormal performance of cryptocurrencies. The high probability of a Fed rate cut is actually supported by multiple economic data points.

Concerns over the labor market have become a key driver for easing policies. In September, nonfarm payrolls increased by only 39,000, and the unemployment rate for college graduates aged 20-24 rose to 8.5%, up 70% from the 2022 low. Private sector jobs in November further decreased by 32,000, marking the lowest level since March 2023, with signs of a weakening job market prompting dovish officials to firmly support rate cuts.

While inflation data remains somewhat resilient, the delayed release shows September’s CPI up 3% year-over-year, with core inflation gradually declining, providing room for rate cuts.

Contradictions in economic growth further reinforce the need for easing:
US real GDP growth is expected to reach 3%, and the holiday shopping season has been strong, yet the University of Michigan’s December consumer sentiment index is only 53.3, a 28% year-over-year plunge, indicating diverging growth momentum that needs policy support.

Even with a high probability of rate cuts, there are still three major uncertainties surrounding policy implementation. Internal divisions within the Fed are significant, with hawks worrying that rate cuts could trigger a rebound in inflation, especially since core inflation has not returned to the 2% target range. Uncertainty over balance sheet policy adds further complexity, with the market focused on whether Chair Powell will announce a $45 billion per month Treasury purchase plan. The implementation or not of this “stealth QE” will directly affect liquidity injection levels.

Additionally, rumors about the next Fed Chair have raised concerns over policy continuity, with Wall Street warning that leading candidates may slow the pace of easing and weaken the actual effects of rate cuts. These variables mean that rate cuts are not a foregone conclusion, and even if implemented, could be “hawkish cuts,” casting a shadow over the market.

The root cause of cryptocurrencies falling instead of rising amid rate cut expectations is “priced-in expectations plus concentrated short-term risk release.”

From a market cycle perspective, the 87% probability of a rate cut was already priced in during the September-October rebound, when Bitcoin climbed from lows to the $90,000 range, reflecting the benefits of easing in advance. The current phase is a “buy the rumor, sell the news” pullback. Year-end liquidity pressures further intensify volatility, as institutional investors lock in annual gains, leading to concentrated liquidation of leveraged long positions and triggering a $350 million liquidation chain reaction. More importantly, risk events within the crypto industry and regulatory uncertainty have compounded the situation, with hacker attacks and exchange security incidents prompting risk-off selling, while ambiguous US crypto regulatory policies further dampen institutional capital inflows.

In summary, the likelihood of Bitcoin breaking through to a new $120,000 high in the coming weeks is low, though the medium- to long-term bullish thesis remains intact. In the short term, technicals show Bitcoin is trapped between $88,000 support and $92,000 resistance, with insufficient volume for a breakout rally. Even if the rate cut is implemented as expected, historical data shows a single rate cut can only boost Bitcoin by 10%-15%, at most reaching the $100,000 mark. A $120,000 high would require a combination of “rate cut + dovish guidance + greater-than-expected liquidity injection.”

In the medium to long term, if a rate cut kicks off an easing cycle, combined with the liquidity surge from balance sheet expansion, Bitcoin could replicate the bull market that followed the 2020 rate cuts.

The rise of green mining infrastructure and deeper institutional adoption further provide fundamental support, with sustainable mining models from companies like Bitzero attracting institutional capital and laying the groundwork for long-term market growth.

The crypto pullback amid rate cut expectations is essentially a sign of market maturity—crypto assets are no longer simply following monetary policy volatility, but are increasingly subject to their own fundamentals and capital cycles.