Rising Probability of Fed Rate Cuts in 2026 Could Fuel Bitcoin Rally

As the new year begins, financial markets are increasingly focused on Federal Reserve policy expectations. Market analysts widely anticipate that the Fed rate cut probability will play a pivotal role in determining cryptocurrency valuations, particularly Bitcoin, throughout 2026.

Dollar Weakness Sets Stage for Rate Cut Expectations

The U.S. dollar faced its most significant annual decline in nearly a decade during 2025, dropping approximately 10% in value. This currency weakness has historically preceded periods of monetary easing. According to market analysis, expectations of further Fed rate cuts in 2026 are likely to continue pressuring the dollar lower, which could redirect investor capital toward alternative assets like Bitcoin. The divergence between dollar performance and precious metals like gold and silver underscores the market’s uncertainty about the Fed’s policy direction.

Market Pricing in High Probability of Fed Policy Shift

Recent Federal Reserve meeting minutes revealed notable disagreement among policymakers regarding the pace of future interest rate adjustments. Current market expectations suggest an 82% probability that the Fed will maintain rates at its January gathering, while leading forecasting platform Polymarket indicates a 96% probability of rate cuts occurring before June. These conflicting signals reflect the complex calculus surrounding monetary policy, yet the overall trajectory points toward looser conditions ahead.

Bitcoin’s Path Forward Hinges on Rate Cut Timing

Bitcoin’s price has remained relatively flat near $87,800, failing to capitalize on the broader weakness in the dollar. Should fed rate cut probability increase as anticipated, historical patterns suggest such policy shifts often trigger appreciation in non-correlated assets including cryptocurrencies. President Trump’s recent comments hinting at potential leadership changes at the Federal Reserve, combined with advocacy for deeper reductions to the current 3.5%-3.75% interest rate range, add another layer of policy uncertainty that could catalyze market movements once Fed rate cuts materialize.