Recently, expectations regarding US monetary policy, new trends in government regulation, macroeconomic data, and enforcement measures have jointly determined sharp fluctuations in the price of Bitcoin, intensified the confrontation between bulls and bears, and in the short term, created a two-sided effect: “policy easing expectations provide support, while regulatory uncertainty puts pressure.”

I. Monetary Policy: Rate Cut Expectations as Key Support, Policy Fluctuations Increase Volatility

The Federal Reserve's monetary policy shift is the key macro factor influencing Bitcoin dynamics; changes in easing expectations and contradictory signals dominate market sentiment:

1. Rate cut expectations stimulate a rebound: in November, US ADP employment unexpectedly fell by 32,000 (the largest drop since March 2023), intensifying concerns about slowing economic growth; the probability of a 25-basis-point Fed rate cut in December soared to 89%. Easing expectations reduce the cost of holding non-yielding assets, which triggered a V-shaped rebound in Bitcoin from around $85,000 to $93,000 in early December.
2. Contradictory Fed signals cause volatility: some Fed officials point to the need to reassess inflation risks, and policy statements remain ambiguous; against the backdrop of the end of the quantitative tightening program (QT) at year-end and improved liquidity, Bitcoin’s price has behaved like a “roller coaster” — in December, daily swings of more than 4% were repeatedly recorded, mass liquidations of leveraged positions occurred, with the maximum liquidation volume in 24 hours exceeding $1 billion.

II. Regulatory Policy: Interaction Between Compliance Progress and Uncertainty of New Measures

The dynamics of cryptocurrency regulation in the US affect the market in two aspects — “clear entry rules” and “future risks”: in the short term — panic, in the long term — positive.

1. Progress in legalization opens doors for institutions: previously, the adoption of the “GENIUS” Act and SEC approval of spot Bitcoin ETFs addressed key custody and compliance issues, which triggered a massive inflow of institutional funds, strengthened Bitcoin’s status as a legitimate asset, and became the most important foundation for price growth in the second half of the year. At the same time, the SEC officially transferred regulatory authority over Bitcoin to the CFTC and removed the plan to review cryptocurrencies in 2026, reducing long-term regulatory uncertainty and attracting pension and hedge funds.
2. Rumors of new regulatory measures amid a change of power triggered sell-offs: ahead of the inauguration of the new Trump administration in January, rumors surfaced about possible tightening of anti-money laundering requirements (AML) and revisions of stablecoin issuance rules. Institutional investors, fearing rising costs, opted to reduce risks in advance and sell assets, which led to Bitcoin falling below $85,000 on December 8 — the largest daily drop since mid-November.

III. Macroeconomic Data: Employment Figures and Economic Growth Rates Increase Market Sensitivity

Weak macroeconomic data in the US simultaneously strengthen expectations of policy easing and raise concerns about economic slowdown, indirectly affecting the assessment of Bitcoin as a risky asset:

1. Weak employment data benefit risk assets: in November, the decline in ADP employment and a sharp drop in the consumer confidence index confirmed a cooling labor market, supported the logic of a Fed rate cut, and contributed to a flow of funds from the dollar and bonds into Bitcoin and other risk assets, causing direct price increases.
2. Lower economic growth forecasts increased risk aversion: the OECD lowered its forecast for US economic growth in 2026 from 2.0% to 1.7%, and the global forecast to 2.9%. Against the backdrop of unstable US tariff policy, market chaos intensified, some investors fled risk assets, which in early December led to a 6.2% drop in Bitcoin in one day and a $230 billion reduction in market capitalization.

IV. Enforcement Measures: Short-Term Blow to Confidence, Long-Term Acceleration of Industry Legalization

US Department of Justice actions regarding cryptocurrencies undermine market confidence in the short term, but in the long term contribute to compliance and industry development. Impact: “negative in the short term, neutral-to-positive in the long term”:

1. Short-term blow to confidence: the largest-ever US DOJ Bitcoin seizure — over 320,000 coins, making the government one of the world’s largest holders. Law enforcement’s hacking of private keys shattered the perception of Bitcoin’s “decentralization” and “absolute key security,” which in late November caused a sharp price drop and a net outflow of over $870 million from ETFs in a single day.
2. Long-term boost to compliance: law enforcement actions confirm Bitcoin blockchain’s traceability, prove that cryptocurrencies are not a legal vacuum, and further reduce institutional investor concerns. Currently, 152 public companies hold Bitcoin, and the share of institutional volumes exceeds 99.5% — the compliance process is accelerating.

Overall, Bitcoin is currently extremely sensitive to news from the US: in the short term, the key factor is the Fed’s December rate decision (actual rate cut and tone of accompanying statement), in the long term — details of regulation from the new administration and further inflows of institutional funds. Prices are likely to remain highly volatile, and policy signals and liquidity changes will determine the fundamental logic of price formation.
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