Federal Reserve December Decision: A “Divided” Rate Cut, Why Can't the Market Smile?

The Federal Reserve still cut rates, but this time the 25 basis point move feels more like a fractured compromise rather than the “confidence booster” the market expected.

The December FOMC meeting concluded with the federal funds rate falling as scheduled to 3.50%-3.75%, completing a “three consecutive cuts” since September. However, behind the appearance of unified action lies the most serious internal division at the Fed in nearly six years — among nine voting officials, three opposed the decision. This rare split is enough to alert any keen investor.

Divided Federal Reserve, Fuzzy Signals

This controversy can be described as two extremes: one side believes a 50 basis point cut is needed to counteract employment slowdown risks, while the other argues no rate cuts should be made. More paradoxically, the Fed simultaneously cut rates and announced the resumption of Treasury bond purchases on December 12. This “cut + balance sheet expansion” combo seems like a double boon but actually exposes deep anxieties: the weakening labor market has caused official concern, but slightly elevated inflation prevents a fully dovish stance.

Powell tries to balance on a tightrope, but the market interprets it as “hawkish soul under a dovish guise.” The dot plot indicates policymakers expect very cautious rate cuts in 2025, possibly holding rates steady for a long time. This suggests the market’s expectation of “continuous easing” is nearing collapse.

Why the Crypto Market Isn’t Buying It?

$BTC and $ETH didn't rally as expected after the announcement; instead, they entered a state of consolidation. There are three reasons behind this “dampening of positive signals”:

1. Expectations were already priced in: The strong rally since October was essentially a pre-emptive trade on rate cuts. When the move materialized without surprises, profit-taking naturally followed.

2. The “higher for longer” shadow: If interest rates stay high longer than expected, all risk asset valuations will face re-evaluation pressure. For highly volatile crypto assets, this is a Damocles sword hanging overhead.

3. Weakened liquidity narrative: When the Fed itself is uncertain about policy direction, the resolve for new capital inflows will be hindered. In the short term, crypto market movements depend more on internal capital battles than macro liquidity injections.

At the Crossroads

This “divided” rate cut reveals a key fact: the Fed itself is lost between a soft landing and inflation risks. For crypto markets, this means the era of relying on “macro liquidity” narratives is over; future trends will depend more on fundamentals, application scenarios, and sector rotation.

By 2025, we might see a more fragmented market — high-quality assets establishing real value amid volatility, while purely narrative-driven projects face liquidity dry-ups.

So, is this the start of a bull market, or a relay in a bear market?

The answer may not lie in the Fed’s meeting room but in the decisions of each participant.

Uncertainty in the macro environment persists, but market maturity is reflected in: no longer blindly cheering every policy stimulus. The next step depends on whether BTC and $ETH can break out independently, which hinges on whether capital is willing to continue betting on risk assets amid ambiguity.

What do you think about this “divided” rate cut? What do you believe will be the core drivers of the crypto market in 2025? Macroeconomic liquidity, institutional entry, or breakthroughs in applications?

Feel free to share your deep insights in the comments. If this article helped you clarify your thinking, follow @CryptoDigger for the latest market analyses, and don’t forget to share with friends also watching this macro game. Together, we seek certainty amid uncertainty.