CME FedWatch now implies better than 70% odds that the Federal Reserve will cut rates by 25 basis points at its Dec. 9-10 meeting, dropping the target range from 3.75%-4.00% to 3.50%-3.75%.
That marks a dramatic intraday reversal on Nov. 21, when New York Fed President John Williams told reporters the Fed can still trim rates “in the near term” without threatening its 2% inflation target.
A few days before, the same probability sat near 30%, weighed down by a government data blackout and hawkish Fed commentary.
The question now is whether a December cut carries enough conviction to pull Bitcoin (BTC) out of protection mode, or whether the macro tailwind arrives too late for a market already bleeding leverage and ETF flows.
Between Nov. 20 and 21, Bitcoin dove from $91,554.96 to $80,600, before recovering to $84,116.67 as of press time. The movement worried investors, who are not certain if BTC reached its local top this cycle at $126,000, and there is no steam left for an upward movement.
The rate-cut narrative matters for Bitcoin because it translates directly into real yields and liquidity.
Over the past two months, inflation-adjusted Treasury returns climbed as markets priced out easing, pulling capital away from high-beta assets and tightening global liquidity.
If the Fed now delivers the cut markets expect and signals more to come, real yields should compress and liquidity should expand, conditions that historically correlate with Bitcoin outperformance.
However, on-chain data from Glassnode and derivatives positioning show the market hasn’t flipped yet.
Recent buyers are underwater, ETFs are bleeding, and options traders are paying double-digit premiums for downside protection.
What changed and why it moved odds so fast
Williams’ comments hit a market that had just repriced December odds down to 30% amid uncertainty over employment data.
His statement that near-term cuts remain viable without jeopardizing inflation control permitted traders to reload rate-cut bets. By Nov. 21 close, FedWatch probabilities had spiked above 70%, reversing a multi-week drift lower.
The swing reflects how sensitive markets have become to Fed messaging after two cuts already delivered in 2025, the most recent on Oct. 29, which brought the funds rate to 3.75%-4.00% and announced that quantitative tightening would end Dec. 1.
September payrolls printed at 119,000 with unemployment edging up to 4.4%, data that split Wall Street. JPMorgan, Standard Chartered, and Morgan Stanley pulled their December-cut forecasts, arguing the jobs print wasn’t weak enough to justify further easing.
Citi, Deutsche Bank, and Wells Fargo held firm, pointing to the uptick in unemployment as proof that the Fed has room to ease. Williams’ remarks tipped the balance, validating the dovish camp.
Markets now price a 70% chance the Fed follows through in December, with further easing expected in 2026 if inflation remains contained.
The 10-year nominal Treasury yield has already fallen roughly 60 basis points this year, and TIPS breakevens sit just above 2.2%, suggesting markets believe inflation can stay anchored even as policy eases.
Real yields, liquidity, and why Bitcoin cares
The relationship between Bitcoin and real yields has become the dominant macro narrative this fall.
Rising inflation-adjusted returns on Treasurys pull capital away from zero-yielding assets like Bitcoin.
S&P Global’s work shows a negative correlation between Bitcoin and real yields that has strengthened since 2017, with the asset tending to outperform when policy eases and liquidity expands.
Bitwise’s research overlays Bitcoin against global M2 money supply, showing that periods of re-accelerating money growth and easier Fed policy coincide with stronger Bitcoin performance.
The recent dollar pullback and renewed M2 expansion should become tailwinds once markets trust that cuts will continue.
A December cut backed by guidance toward further easing would cap real yields and rebuild the liquidity backdrop that historically supports Bitcoin.
Yet, the mechanics only work if the cut arrives with conviction. A one-and-done cut followed by hawkish guidance would leave real yields elevated and liquidity constrained.
Williams’ comments matter because they suggest the Fed sees room for multiple moves, not just a token cut in December. If that proves true, the path toward falling real yields and a softer dollar becomes credible, giving Bitcoin a chance to flip from selling off with liquidity to trending with it.
What Glassnode sees on-chain and in derivatives
Glassnode’s Nov. 19 report maps how hard the recent drawdown hit and why positioning remains defensive.
Bitcoin broke below the short-term holder cost basis and the -1 standard deviation band, slipping under $97,000 and briefly touching $89,000, which aggravated on Nov. 21 with BTC almost losing the $80,000 footing.
That leaves almost all recent cohorts sitting at an unrealized loss and turns the $95,000-$97,000 zone into resistance.
Glassnode estimates 6.3 million BTC now sit underwater, mostly in the -10% to -23.6% range, a distribution that resembles 2022’s range-bound bear market more than full capitulation.
Two price levels stand out. The Active Investors’ Realized Price sits around $88,600, representing the average cost basis for coins that move regularly.
The True Market Mean, near $82,000, marks the threshold between a mild correction and a deeper 2022-style bear phase. Bitcoin currently trades between those levels.
Off-chain flows reinforce the caution. US spot ETFs show a firmly negative seven-day average, with November outflows approaching $3 billion.
That suggests institutional allocators aren’t stepping in to buy the dip. Futures open interest drifts lower alongside price, implying traders are de-risking rather than adding leverage.
Options positioning screams protection mode. Implied volatility spiked back toward levels last seen during October’s liquidation event, skew tilts sharply negative, and one-week puts trade at a double-digit premium to calls.
Net flows show traders paying up for $90,000 downside strikes while adding only modest call exposure. Glassnode’s read is that dealers are short delta and hedging through futures selling, which mechanically adds pressure when the market weakens.
The path forward depends on Fed conviction
A December cut accompanied by guidance toward further easing would cap real yields and rebuild liquidity, the conditions Bitwise and S&P Global identify as historically favorable for Bitcoin.
The 70% probability now priced into FedWatch reflects growing confidence that the Fed sees a path to ease without reigniting inflation, which is exactly what Bitcoin needs to flip the narrative.
But Glassnode’s on-chain and derivatives data show the immediate setup remains fragile. Recent buyers are underwater, ETFs are bleeding, leverage is unwinding, and options positioning favors protection over conviction.
That means even a December cut might not trigger an immediate reversal if it comes without clear guidance on future moves.
If the Fed blinks or delivers a one-and-done cut while emphasizing inflation risk, the macro impulse could prove too weak to shift ETF flows or flip risk appetite.
Bitcoin would remain pinned below the $95,000-$97,000 resistance that Glassnode now considers structural.
Williams’ comments cracked the door open. A December cut with forward guidance could push it wider. Whether that’s enough to pull Bitcoin through depends on whether the Fed treats December as the start of a new easing cycle or the end of a brief recalibration.
Markets are pricing the former at 70% odds. The on-chain data suggests traders aren’t convinced yet.
