Why December Will be Critical For Bitcoin and Crypto

After spending most of the year in a bull market, Bitcoin and other cryptocurrencies have seen substantial losses over the last two months. 

The entire cryptocurrency market has erased over $1.3 trillion since early October, losing around 30% of its value during that time. Bitcoin fell from $100,000, Ethereum slipped below $3,000, and many other assets lost value as broader market sentiment shifted from optimism to fear. 

Still, investors have a lot to look forward to in December. From monetary easing expectations to the Federal Reserve’s confirmed end of quantitative tightening, the month is shaping up to be pivotal for risk assets and could set the tone for how the market will enter 2026. 

Fed Rate Cut Expectations Almost a Given

The December 10 Federal Open Market Committee (FOMC) is gearing up to hold a third consecutive interest rate slash in 2025. While only a week ago, rate cut odds were pointing to no cuts at all, the tables have now turned. NY Fed President John Williams set the ball rolling last Friday, reinforcing that there's still “room for a further adjustment in the near term.”

Adding to that notion, this week's unemployment rate (September data) ticked upward to 4.4%, the highest it has been since 2021, even if Non-farm payrolls rose by 119,000. Today, PPI inflation from September reinforced the idea that the Fed should focus on labor. September’s PPI came in flat, underscoring that inflationary pressures are easing while labor markets remain the Fed’s main concern.

As a result, futures are pricing an 82% chance that the Committee will lower interest rates to a target range of 3.75 - 3.50% on December 10. 

source: CME FedWatch

For crypto, another dovish turn means looser financial conditions. And easier access to capital usually translates to a surge in demand for speculative assets like Bitcoin and Ethereum. 

Fed Ending QT

The latest Fed minutes revealed that nearly all members agreed to end quantitative tightening (QT) on December 1st. QT started in 2022 as the Fed looked to reduce excess liquidity from the economy, following the COVID years. The effort, alongside raising interest rates to their highest point in over a decade, was aimed at battling inflation and reining in an overheated economy.

When quantitative tightening is in effect, the Fed is essentially pulling money out of the financial system. Central Banks achieve that goal by letting their government bonds mature without reinvestment, keeping those funds in their reserves -- effectively reducing the supply of cash flowing around.

Basically, QT is to the Federal Reserve what "HUGE BURNS WOW" is to $SHIB. 

Recent macro trends like slower economic growth and signs of labor market strain are likely the culprits for QT to end. In light of those circumstances, the Fed is shifting its focus from draining liquidity to stabilizing financial conditions, signaling that the balance sheet will remain steady while rate cuts take center stage.

For markets like crypto, ending QT isn't necessarily "bullish", as the Fed will move to a "neutral" balance sheet and hasn't announced plans of Quantitative Easing yet. However, the mere act of stopping liquidity drain removes a major headwind, giving assets like Bitcoin bigger breathing room in times of uncertainty. 

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Magnificent 7 Expectations

Wall Street analysts are turning increasingly optimistic on Big Tech heading into 2026. According to Phil Rosen, the “Magnificent 7” are projected to deliver one of their most consistent earnings acceleration cycles in years, with growth stepping up quarter after quarter.

The lead-up to those expectations matters quite a lot for digital assets. Consensus now sees earnings growth of nearly 20% in Q4 2025, rising to 24.5% by Q3 2026.

Cryptocurrencies have been trading similarly with the AI stocks, for better or for worse. 

If these stocks can meet those analysts' expectations, there's a strong likelihood of a stronger market. However, if they happen to fail, selling pressure may continue all the way to 2026.