Bitcoin Falls Despite Fed Rate Cut Amid Rising Concerns Over Inflation and Election Risks
On December 11, 2025, Bitcoin declined about 2% within 24 hours to just under $90,200 following a 25 basis point rate cut by the Federal Reserve. Market participants had anticipated the cut ahead of the announcement, leading to a "sell the fact" reaction in the bitcoin market.
The Federal Reserve's balance sheet expanded through reserve management purchases of Treasury Bills totaling around $40 billion over 30 days, marking the first balance sheet expansion since quantitative tightening began in mid-2022, excluding the March 2023 banking crisis.
Risks affecting Bitcoin include the 2026 U.S. midterm elections, which could enable looser fiscal policy and a more dovish Federal Reserve stance. Such developments could rekindle inflation and push long-term interest rates higher. Furthermore, AI-driven capital expenditures may increase energy and infrastructure costs, contributing to a sticky inflation environment that limits the potential benefits of monetary easing.
Analysts note that the scope for further easing is shrinking, supported by downward revisions in the Fed's dot plot for 2026 rate-cut expectations. Bitcoin's price sensitivity to interest rates means that rising long-term rates could exert pressure on risk assets like Bitcoin.
Prediction-market data from Myriad indicates a 17% chance of a 2025 Santa rally. However, the likelihood of Bitcoin reaching $100,000 instead of $69,000 has declined by about 5 percentage points.
