FOMC decision imminent: Can Bitcoin and Ethereum continue their rise? Insights from changes in stock pledge rates

Policy Turning Point Has Arrived, Easing Expectations Rise

On Tuesday (December 9), on the eve of the Federal Reserve’s December interest rate decision, easing expectations continued to heat up. “Shadow Chairman” Haskett publicly stated that current economic data has left ample room for further rate cuts, with the potential for more than 25 bps. Three Fed governors appointed by Trump—Bostic, Mester, and Waller—have expressed support for a December rate cut, and with Chairman Williams hinting at the possibility of easing, the market generally expects a scenario where six members lean toward easing and six favor holding in this decision.

Although job vacancies increased from 7.66 million in October to 7.67 million, signals of slowing hiring and rising layoffs are more evident, indicating that the US labor market remains under pressure. In balancing employment and inflation targets, the Fed tends to act proactively.

Liquidity Improvement Drives Asset Rotation

Supported by easing expectations, the crypto market rebounded. Bitcoin rose 2.26% ahead of the decision, climbing for three consecutive days, with the current price around $87.70K; Ethereum performed even more impressively, surging over 8% at one point, approaching $2.95K, hitting recent highs.

Market focus is not only on the rate cut itself but also on the Fed’s subsequent pace. Powell may adopt a “cut first, then tighten” strategy—initially lowering rates by 25 bps, followed by hints of higher thresholds for easing next year. This policy uncertainty indirectly pushed up stock pledge rates, increasing short-term corporate financing costs, which is also part of the reason the market is turning to crypto assets for yield.

The Logic Behind Diverging Ethereum Performance

Ethereum has recently outperformed Bitcoin significantly, driven by two main factors: first, increased expectations for staking ETF subscriptions; second, renewed attention to asset tokenization applications. Ethereum has gained over 10% this week, reflecting a reassessment of its application layer.

However, the overall crypto rebound is more attributable to improved liquidity expectations. The Fed officially ended QT (quantitative tightening) on December 1, having withdrawn about $2.4 trillion from the financial system since June 2022—second only to the scale during the 2017-2019 QT cycle. The termination of QT means the Fed is no longer actively draining liquidity, providing a more stable funding environment for assets.

Hidden Risks: Rising Yields as a Warning Signal

It is worth noting that yields on major government bonds worldwide continue to rise, creating a strange divergence with the Fed’s easing expectations. If the bond market questions the independence of the next Fed chair, the Fed may be forced to turn to quantitative easing (QE) to lower long-term borrowing costs. The impact of the Bank of Japan’s rate hikes on carry trades also warrants close monitoring.

Against this backdrop, rising yields pose potential pressure on risk assets. Whether the crypto rebound is a true reversal remains to be seen. Fluctuations in stock pledge rates also reflect market caution regarding the credit environment.

Technical Outlook: Ethereum Seeks Support in the $3000-3600 Range

The daily chart shows Ethereum has been steadily rebounding since November 21, successfully breaking through the $3000 level. Currently around $2.95K, the upward trend has not shown signs of ending. It is expected to consolidate within the $3000-3600 range, building a mid-term bottom through time rather than price.

The window around December 12 is worth close attention, as it could be a key point for determining the short-term direction. Investors should look for confirmation signals between the rate cut decision and market reactions, rather than rushing to chase highs.