The Federal Reserve's increasing divergence on the interest rate path for 2026 may continue to affect the performance of Bitcoin and the cryptocurrency market

The Federal Reserve has cut interest rates three times by 2025, with the latest adjustment bringing the federal funds rate range down to 3.5%–3.75%. However, the latest policy expectations indicate that, despite rates remaining high since 2008, there may only be room for one more rate cut throughout 2026. The significant divergence within the Federal Reserve regarding the interest rate path is creating ongoing uncertainty for Bitcoin and the crypto market.

Reports indicate that the "dot plot" released by the Federal Reserve in December 2025 shows that policymakers have differing views on the interest rate outlook for 2026, with a similar number of officials expecting no rate cuts, one rate cut, or two rate cuts. This divergence leaves the market lacking clear guidance as it enters 2026. Current median forecasts suggest that the rate will be around 3.6% by the end of 2025 and approximately 3.4% by the end of 2026, implying only one rate cut next year. According to market expectations, CME Group data shows that investors anticipate only about a 20% chance of a 25 basis point rate cut at the January meeting, while the probability of a rate cut at the March meeting rises to about 45%. Analysts generally believe that the labor market, inflation trends (especially the impact of tariffs), and overall economic growth will remain key variables influencing policy direction.

Additionally, Federal Reserve Chairman Jerome Powell's term will end in May 2026, and the uncertainty surrounding the selection of a new chairman is also seen as a potential variable. Some analysts believe that the new leadership may continue a gradual easing path, thereby providing support for risk assets in the mid to later stages. Industry perspectives suggest that if the labor market continues to weaken, even if inflation rebounds temporarily, the Federal Reserve may still implement two rate cuts in 2026; however, there is also a pessimistic scenario where if inflation rises again, rate cuts and liquidity injections may be forced to pause, potentially exerting significant pressure on stocks and crypto assets.

The report concludes that compared to the market's previous optimistic expectations of a "full dovish shift," the Federal Reserve's current more cautious stance is weakening the sentiment recovery in the crypto market. However, from a medium to long-term perspective, the expectation of declining interest rates and leadership changes may still provide phased benefits for high-risk assets like Bitcoin in the future.