"According to the latest data from the FedWatch Tool, the market now estimates an 81% probability that the Federal Reserve will cut rates by 25 basis points in December (up from 69.4% yesterday), while the likelihood of rates remaining unchanged stands at 19%."
This dramatic shift in market expectations has fueled a broad rally in U.S. tech stocks. On Monday, the Nasdaq Composite surged 2.69%, the S&P 500 gained 1.55%, and the Dow Jones rose 0.44%.
The cryptocurrency market followed suit, with Bitcoin briefly breaking above the $88,000 mark and posting a 24-hour gain of 1.29%. Ethereum also held firmly above $2,900, and the overall crypto market cap saw a widespread recovery.
01 Probability of Rate Cut Surges
The likelihood of a Fed rate cut in December soared overnight, jumping from less than 70% last week to over 80% now.
This sharp change was directly triggered by comments from Federal Reserve official Christopher Waller on November 24.
Waller made it clear that his primary concern is the current state of the labor market and advocated for a rate cut at the December meeting.
This rare and explicit signal for a rate cut prompted market participants to rapidly reprice the outlook for Fed policy.
The market isn’t just pricing in a single cut. By January next year, the probability of a cumulative 50 basis point cut has reached 20.6%, indicating that investors expect the Fed may be starting a new rate-cutting cycle.
02 Tech Stocks Lead the Rally
The shift in rate cut expectations first sent ripples through the U.S. equity markets, especially among high-growth tech stocks that are sensitive to interest rates.
On Monday, all three major U.S. indices closed higher, with the Nasdaq Composite standing out with a strong 2.69% gain.
Large-cap tech stocks rallied across the board. Tesla and Google both jumped more than 6%, leading the market higher.
Semiconductor stocks performed even better. The Philadelphia Semiconductor Index soared 4.6%, Broadcom skyrocketed over 11%, Micron Technology rose nearly 8%, AMD gained more than 5%, and Nvidia was up over 2%.
The Nasdaq Golden Dragon China Index also closed up 2.82%. Most popular Chinese ADRs advanced, with Baidu up more than 7%, Bilibili up over 6%, Alibaba up more than 5%, and NetEase up over 4%.
03 Crypto Market Responds
The cryptocurrency market reacted swiftly to the Fed’s rate cut signal, with major cryptocurrencies broadly moving higher.
Bitcoin rebounded on Monday, breaking through the $88,000 threshold and posting a 24-hour gain of 1.29%.
According to CoinMarketCap data, as of November 25, Bitcoin is trading at $87,829.71, up 0.49% over the past 24 hours.
Ethereum (ETH) also showed strong performance, currently priced at $2,927.93 with a 24-hour increase of 3.33%.
Other popular tokens also saw notable gains: XRP rose 7.53% in 24 hours, Monad climbed 12.67%, and Solana gained 3.75%.
04 Historical Correlation and Impact Mechanism
There is a close historical relationship between Fed rate cut expectations and the performance of risk assets.
Rate cuts typically lead to lower short-term Treasury yields and a weaker dollar. Historically, by reducing the discount rate and increasing liquidity, these moves have supported risk assets—including Bitcoin and Ethereum.
Within the traditional monetary policy transmission mechanism, rate cuts lower borrowing costs, encouraging investors to seek higher returns. This often drives capital toward riskier assets like cryptocurrencies and tech stocks.
Bitcoin tends to have a negative correlation with real yields—when real yields fall, Bitcoin usually rises.
This relationship has been validated in previous easing cycles, which explains why Waller’s comments triggered such an immediate market response.
05 Market Outlook and Trading Strategies
As the December Fed meeting approaches, investors are closely watching upcoming economic data and statements from Fed officials to adjust their portfolios.
From a trading strategy perspective, a dovish shift by the Fed typically creates opportunities for risk assets.
Analysts suggest monitoring the coinciding movements between the U.S. Dollar Index pullback, the decline in two-year yields, and Bitcoin’s rally. They also recommend considering hedging altcoin risks around the December FOMC meeting.
If the Fed does cut rates in December, Bitcoin may test key resistance levels at $90,000 or even $100,000.
Similarly, Ethereum could benefit from increased liquidity, with the ETH/USD pair potentially testing the $3,500 level—especially if institutional inflows accelerate.
Outlook
It’s not just U.S. stocks and cryptocurrencies—global risk assets appear to have entered a period of heightened sensitivity to new liquidity. Whether the Fed will meet market expectations at its December meeting will determine if this rally is a brief celebration or the start of a sustained trend.
With less than a month until the December meeting, all eyes are on upcoming employment and inflation data, which will serve as the final pieces in the Fed’s decision-making puzzle.
