Cryptocurrency Weekly Report: Market Volatility and Outlook Post-FOMC (12.08 - 12.12)

• Price Movement and Key Levels: Before the FOMC meeting, the market held high expectations for the interest rate cut path, briefly pushing BTC to rebound and test the key resistance level of $94,500. However, as the dot plot indicated fewer rate cuts in 2026 than market expectations, optimism quickly cooled. BTC fell under pressure, hitting a low of $87,539 and testing the support level near $88,000.
• Liquidity and Selling Pressure: Insufficient market liquidity persisted, and with no significant inflow of ETF funds, the market was primarily dominated by selling pressure. On-chain data showed that the main selling pressure stemmed from liquidation by high-level buyers and profit-taking by Long-Term Holders (LTHs).
• Market Sentiment: Although Taker selling pressure in non-US markets (such as Binance) significantly weakened after the FOMC, market sentiment only recovered from "extreme panic" to "neutral," not yet turning "optimistic."
• Key Support: Short-term funds dominated, with the $90,000 support being relatively weak, while $83,500 – $84,000 is considered the strongest current support zone.

1. Policy Statement and Dot Plot Leaned "Hawkish"
   1. Higher Hurdle for Rate Cuts: The FOMC statement implied that the threshold for further interest rate cuts has been raised.
   2. 2026 Rate Cut Expectation Disappointed: The dot plot indicated only one rate cut in 2026 and one in 2027, falling short of the market's expectation of at least two cuts in 2026, which dampened optimism surrounding future monetary policy easing.
   3. Optimistic Economic Outlook: The Fed revised the 2025 GDP forecast upward (from 1.6% to 1.7%) and significantly raised the 2026 GDP forecast (from 1.8% to 2.3%), suggesting an optimistic outlook for future economic growth.
2. Powell's Speech Hedged the "Hawks"
   1. Emphasis on Employment: Powell's speech was more moderate than expected. He mentioned that inflation is not a rigid indicator and focused more on labor market risks, suggesting there might be a "serious systematic overestimation" in official employment growth data.
   2. Policy Flexibility: He emphasized that decisions would be made on a meeting-by-meeting basis, with no predetermined path for monetary policy, which partially hedged against the hawkish tone of the policy statement.
3. Initiation of Balance Sheet Expansion
   1. Liquidity Fine-Tuning: The FOMC announced the launch of the Reserve Management Fund (RMF) bond purchase program, with the first round purchasing approximately $40 billion of short-term Treasury bonds. Unlike Quantitative Easing (QE), this is a liquidity fine-tuning tool.
   2. Alleviating Market Tension: This move aims to ease liquidity tension in the market (bank reserves have fallen to the $2.9 trillion warning line) and release short-term interest rate pressure by rebuilding financial system reserves.

Short-Term Outlook

• Rangebound Trading or Support Test: Given the neutral-to-slightly-hawkish macro signals, the market is likely to remain in a consolidative range. If selling pressure persists, BTC may re-test or even fall below $88,000, seeking the validity of the strong support zone at $83,500 - $84,000.
• Watch Key Indicators: Close attention should be paid to ETF fund flows and indicators like the Taker Buy/Sell Ratio to determine if market sentiment genuinely shifts from "neutral" to "optimistic."

Medium-to-Long-Term Investment Advice

• Maintain Patience, Staggered Entry: In the current low-risk appetite and rangebound market, Dollar-Cost Averaging (DCA) remains a sound strategy for long-term investors.
• Monitor Liquidity Improvement Signals: While the RMF purchase program is not QE, it is structurally helpful in alleviating financial system liquidity pressure over the long term. Risk assets will gain long-term upward momentum once the market widely anticipates the Fed pursuing more aggressive rate cuts or substantive easing.
• Re-evaluate Risk Exposure:
  • BTC's Core Status is Stable: Market liquidity continues to concentrate on Bitcoin (BTC), indicating its position as "digital gold" and the primary liquidity instrument remains solid.
  • Beware of High Leverage: Significant deleveraging has occurred in the derivatives market; investors should avoid using high leverage for short-term trading to guard against potential market "wicks" and liquidation risks.
  • "Digital Gold" Narrative: Although Bitcoin has not fully demonstrated "inflation hedge" or "safe haven" properties recently, its correlation with traditional markets (like tech stocks) remains strong. Long-term investors should focus on its long-term structural growth narratives (e.g., institutional adoption, regulatory clarity) rather than short-term price fluctuations.