Santa Rally Hopes Rise as Fed Rate Cut Probability Hits 94%

TLDR

• Bitcoin started the second week of December above $90,000 as traders discuss potential Santa rally timing
• Federal Reserve expected to cut interest rates by 0.25% at Wednesday’s FOMC meeting, with 94% probability
• S&P 500 ended the week up 0.3% at 6870, just 0.3% off all-time highs
• Bitcoin open interest dropped to lowest levels since April, suggesting reduced leverage and systemic risk
• Analysis comparing 2025 to 2022 suggests Bitcoin’s long-term price bottom may be complete or near

The stock market closed the week near all-time highs as investors prepare for the Federal Reserve’s interest rate decision on Wednesday. The S&P 500 index ended up 0.3% at 6870, while the Dow Jones Industrial Average rose 0.5% and the Nasdaq Composite gained 0.9%.

Bitcoin started the second week of December trading above $90,000 after dipping near $87,000. The cryptocurrency managed a weekly close around the $90,000 mark before experiencing more volatility on shorter time frames.

Fed Decision Drives Market Expectations

Markets are pricing in an 94% probability that the Federal Reserve will cut interest rates by 0.25% at Wednesday’s FOMC meeting. The decision comes as recent employment data shows weakness in the labor market.

Payroll company ADP reported that the private sector shed 32,000 jobs in November, the largest monthly drop in over two years. Nonfarm payrolls have posted five declines over the last seven months, marking the worst streak in at least five years.

Fed Chair Jerome Powell will deliver a speech and take press questions after the rate announcement. Markets will watch for signals about future policy direction as inflation remains above the Fed’s target.

Traders remain divided on Bitcoin’s short-term direction. Some analysts see the 50-day exponential moving average around $95,500 as a potential retest target. Others identify $84,000 as a key support level for bulls to defend.

Bitcoin derivatives data shows open interest across exchanges has dropped to its lowest levels since April when Bitcoin traded at $75,000. The decline reflects either investor capitulation or apathy according to analysts at CryptoQuant.

Historical Patterns Point to Opportunity

The last two weeks of December have historically been the strongest period for stocks. Since 1950, this period has averaged a 1.4% return according to market strategists.

Network economist Timothy Peterson noted that Bitcoin seasonality data shows prices tend to perform well into year-end. His analysis comparing 2025 to 2022-2023 suggests Bitcoin’s long-term bottom may be either complete or approaching.

The estimated leverage ratio for Bitcoin, which divides open interest by Bitcoin reserves, has declined since mid-November. Lower leverage levels typically reduce systemic risk in the market.

Despite modest price rebounds from recent lows of $80,500, traders have not been tempted to deploy new leverage. This normalization of leverage removes a potential drag on market direction.

Bitcoin has accumulated 171 negative trading days in 2025, slightly above the average of 170 days per year. Some analysts argue this suggests the year will likely close in a sideways price range rather than with strong gains.

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