Bitcoin Briefly Tops $106K Before Pullback as Markets Anticipate a Hawkish Fed Rate Cut

Bitcoin (BTC) surged to a record $106,000 during early Asian trading hours before slipping back to $104,500. The price retreat comes as investors brace for a U.S. Federal Reserve (Fed) rate cut that could carry a hawkish tone, signaling a more cautious outlook for future monetary easing.

The Fed is expected to lower interest rates by 25 basis points, bringing the target range to 4.25%-4.5%, but concerns remain that policymakers will scale back their rate cut projections for next year. A slower pace of easing could undermine risk appetite for assets like Bitcoin, which have thrived on expectations of looser monetary conditions.

Marc Chandler, chief market strategist at Bannockburn Global Forex, highlighted the risk of a hawkish message: “The Fed could deliver a rate cut while signaling fewer reductions ahead, reflecting stronger economic performance and sticky inflation trends.”

The central bank’s decision, updated dot plot, and Chair Jerome Powell’s remarks are due on Dec. 18. A cautious stance could boost U.S. Treasury yields and the dollar, posing headwinds for Bitcoin’s bullish momentum.

However, broader market dynamics remain supportive of Bitcoin’s rally. Growing global liquidity, driven by anticipated rate cuts worldwide and easing measures in China, continues to favor risk assets. In addition, President-elect Trump’s pro-crypto stance has fueled investor optimism around regulatory clarity and institutional adoption.

“Even if the Fed delivers a hawkish cut, the global macro environment is supportive for Bitcoin,” analysts at LondonCryptoClub said. “With improving liquidity and seasonal strength, BTC could absorb short-term headwinds.”

Markets will closely watch the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, later this week. The data will help determine whether recent inflation spikes are temporary or part of a longer trend that could complicate the Fed’s policy path.

Despite the pullback, Bitcoin’s record-setting performance underscores its growing appeal among investors as a hedge against monetary uncertainty and inflation risks, with long-term sentiment remaining firmly bullish.