The Federal Reserve's decision to hold steady in January is a done deal, with the next rate cut window pointing to March.

The probability of the Federal Reserve maintaining interest rates in January has risen to 88.4%, essentially signaling that the likelihood of further rate cuts in the short term is minimal. However, this does not mean the end of the easing cycle; rather, it reflects a market re-pricing of the subsequent policy pace— the probability of a total 25 basis point cut in March reaching 40.3%, significantly higher than January’s 11.6%. This shift indicates the true trajectory of U.S. economic data and the cautious stance of policymakers.

Three Reasons for the “Hold” in January

Structural slowdown in the employment market

According to the latest information, the U.S. labor market is experiencing a structural cooling, with unemployment rate, quits, and wage growth all weakening simultaneously. This change suggests that although the economy has not entered a recession, demand has clearly slowed. The Fed faces a delicate balance—avoiding overly tight policies that could worsen the economy, while preventing excessive easing that could push inflation higher. Under this uncertainty, choosing to hold steady in January was the most prudent option.

Mixed signals from economic data

Q3 GDP exceeded expectations, providing the Fed with a reason to pause. The December FOMC minutes show some officials are cautious about rapid rate cuts. This means that despite weakening employment data, economic resilience remains, insufficient to trigger a new round of rate cuts immediately.

Policy uncertainty disturbances

There is uncertainty surrounding the Fed chair nomination. Market expectations suggest that former President Trump might nominate Kevin Hasset around January 9th as the next Fed chair, who is generally viewed as more dovish. Such potential policy shifts could also prompt current decision-makers to adopt a wait-and-see approach.

March as the Next Key Time Window

By the March FOMC meeting, market pricing for rate cuts has changed significantly. The probability of a total 25 basis point cut has jumped from 11.6% in January to 40.3%. This is not just a numerical change but a market re-evaluation of the entire easing cycle.

The key is that during this period, a series of important data releases will occur—this week’s non-farm payrolls, ISM manufacturing and services PMI will be key indicators. If employment data weakens noticeably, easing expectations will be reinforced; if data remains strong, markets may continue to fluctuate.

Impact Pathways on the Crypto Market

The current market reality is: Bitcoin remains oscillating at high levels, derivatives data show implied volatility in options has decreased, and put options maintain a certain premium, reflecting a more defensive market stance rather than active bullish bets. This cautious attitude is rational—until the Fed’s policy path becomes clearer, excessive optimism or pessimism is inappropriate.

Easing Expectations Are Quietly Priced In

Although the crypto market appears calm on the surface, the logic of easing is quietly advancing. The Fed’s $746 billion “liquidity injection” has set a record, and gold prices have surged past $4,500, all indicating capital is preemptively trading in easing risk premiums. Several analysts, including Arthur Hayes, expect the U.S. government to undertake large-scale deficit spending and credit expansion, with excess dollar liquidity eventually flowing into various assets.

The question is: when will this liquidity flow into crypto? Currently, capital remains on the sidelines. But once certainty emerges—whether through weak employment data or the confirmation of a dovish chair—the shift in liquidity could happen rapidly.

Key Observation Points

• This week’s non-farm payroll data: especially whether the November data is revised downward, which will directly influence market recession risk pricing
• ISM PMI data: manufacturing and services sector health will provide insights into economic outlook
• Fed chair nomination: confirmation of Hasset will strongly signal a dovish stance
• March FOMC meeting: markets are already pricing in the probability of rate cuts at this meeting

Summary

The Fed’s decision to hold rates in January is now a certainty, but this is not the end of the easing cycle—it’s the beginning of a re-pricing process. Market focus has shifted to March, where employment data, policy nominations, and economic trends will jointly determine the pace of future rate cuts. For the crypto market, the current high-level oscillation is a stage of accumulation—once easing expectations are confirmed, the shift in liquidity could come faster than expected. The key is to patiently wait for signals of certainty.