The Federal Reserve sets the tone for the market this week: three considerations behind Bitcoin's breakthrough of $90,000

Entering the second week of December, Bitcoin is experiencing a critical technical rebound. According to the latest data, this digital asset has bounced back from a low near $85,000 at the beginning of the month to $91,950, up 1.8% in a single day, with a monthly increase of 5.3%. However, behind this rebound lies a complex story of intertwined factors involving the Federal Reserve, liquidity, and technical signals.

Institutional Capital Reflows as a Key Turning Point

The most notable change comes from the spot Bitcoin ETF market. On December 5th, this sector saw a net inflow of $54.79 million, ending weeks of capital outflows and finally reversing the trend. This reversal is especially evident in ARK Invest’s ARKB fund — leading with an inflow of $88 million. Despite other issuers experiencing capital rotation, the overall trend indicates that institutional confidence is recovering.

This restorative buying pressure has pushed Bitcoin back above $90,000 and helped stabilize it within the $90,000 to $92,000 trading range. However, spot trading activity remains subdued, and the market as a whole is still in a cautious wait-and-see mode.

Federal Reserve Decision: The Main Catalyst for Short-term Market Movements

This Wednesday (December 18th), the Federal Reserve will announce its final interest rate decision of the year, which is currently the market’s most critical focus. Market expectations have priced in a 25 bps rate cut, believing this will improve dollar liquidity conditions.

Amber Group CEO Michael Wu pointed out in an interview that the speed at which expectations for interest rate changes propagate in the crypto market far exceeds that of traditional assets. He further explained that the interest rate differentials and borrowing costs move in sync with global rate guidance, prompting many trading institutions to reassess their fiscal strategies and diversify liquidity to respond to macro cycle acceleration.

Meanwhile, US economic data also sends mixed signals. Service sector inflation has retreated from its peak but remains above commodity prices, and housing costs are still above the Fed’s target. This asymmetric price development adds complexity to the Fed’s decision-making.

MarketWatch forecasts that initial jobless claims could surge to 221,000 on Thursday (up from 191,000), which could support a rate cut. Conventional logic suggests that rate cuts are positive for risk assets, as lower borrowing costs stimulate investment demand.

However, Merkle Tree Capital Chief Investment Officer Ryan McMillin expressed concerns about market liquidity. Since the large leverage liquidation event on October 10th, market makers have been reluctant to return, and order book depth remains limited, constraining Bitcoin’s upward breakout potential.

Technical Structure: Opportunities and Risks Coexist

From a technical perspective, Bitcoin shows typical range-bound characteristics:

Short-term Moving Averages Support: The 10-day EMA stands at $90,481, and the 10-day SMA at $90,454, with both lines closely aligned, providing a solid support level for short-term trading. The 20-day SMA is at $89,370, forming a secondary support layer.

Medium-term Resistance Level: The 30-day SMA at $92,387 will be a key signal for trend strengthening if broken. Longer-term, the 100-day SMA ($106,506) and 200-day SMA ($109,093) remain in a downtrend, indicating ongoing medium-term resistance.

Momentum Indicators: The Relative Strength Index (RSI) is at 46, stochastic at 62, and momentum at 224, showing a slight upward tilt but not overbought. The MACD remains in negative territory (-2,051), consistent with the current stable market structure.

Professional analyst Peter Brandt notes that Bitcoin’s movement resembles an expanding consolidation pattern, suggesting a potential structural rotation. He emphasizes that $80,200 is a critical support level; a breakdown could see prices drop to $58,800. Other analysts focus on $89,000 as a stabilization zone, with a sustained break above this level crucial for maintaining positive sentiment.

December Opportunity Window: The Tug of War Between Fear and Fundamentals

K33 Research analyst Vetle Lunde offers a relatively optimistic December outlook. The firm believes that, after the most severe correction since the last bear market, current market rebound evidence far exceeds the likelihood of another crash.

Several structural signals support this view: Bitcoin’s trading price is close to the historically strong support zone of $70,000–$80,000; the futures market remains cautious and not overly leveraged; perpetual markets show low leverage characteristics, with no major liquidations.

Notably, spot Bitcoin ETFs shifted from being the largest buyers in November to net sellers, and CME futures volume has fallen to multi-year lows, reflecting cautious attitudes from traditional finance. Bitcoin’s relative performance also lags behind equities, with its ratio to the Nasdaq reaching the lowest level since late 2024.

However, K33 believes the market overreacts to distant risks while overlooking short-term strong signals. Their December outlook states that the probability of upward movement outweighs the risk of an 80% retracement. They emphasize that long-term concerns such as quantum computing risks or stablecoin instability, while dramatic-sounding, are unlikely to pose immediate threats within the next few years and should not drive current price volatility.

More importantly, policy shifts toward a pro-crypto stance are possible, including the potential inclusion of crypto assets in 401(k) accounts. These structural factors have accumulated, causing Bitcoin’s current valuation to reflect more market fear than fundamental change.

Positioning Perspective: Cautiously Optimistic with Opportunities

This week’s Federal Reserve decision will set the tone for December. If a 25 bps rate cut occurs as expected, it will provide a phase of support for risk assets. Coupled with the fact that the Fed ended quantitative tightening on December 1st, the market has prepared a policy environment conducive to a rebound.

Bitcoin’s current price of $91,950 is above key technical support levels ($89,000–$90,000 range) and faces medium-term resistance at $92,387 (30-day SMA), forming a critical decision point. If investors are optimistic about the stimulative effects of rate cuts, deploying at this level could be attractive; conversely, if liquidity concerns persist, waiting for clearer technical breakout signals is prudent.

December is likely to be the last opportunity window of the year, but opportunities often come with risks. The market’s ultimate performance will depend on the interaction of the Fed’s decision, employment data, and liquidity conditions.