After a turbulent and underperforming year, Bitcoin and the overall cryptocurrency market are at a new crossroads. According to Forbes, with rising market expectations for future interest rate cuts by the US Federal Reserve (Fed) and signs of a weakening dollar, several analysts believe these macroeconomic factors could provide a new wave of upward momentum for Bitcoin in 2026.
Bitcoin entered a consolidation phase, failing to keep pace with the rise in precious metals.
Gold and silver prices have been rising recently, but Bitcoin has been relatively weak, hovering around $90,000 for an extended period without a significant breakout. The market generally believes this reflects investors' continued wait-and-see approach to Federal Reserve policy and whether there will be a substantial shift in the global financial environment.
The US dollar suffered its biggest annual drop in many years, and interest rate cuts became the market consensus.
Analysis indicates that the US dollar has fallen nearly 10% against a basket of major currencies this year, marking its most significant annual decline since 2017. The market believes this trend is closely related to expectations that the Federal Reserve may cut interest rates in the future.
In response, James Knightley, Chief International Economist at ING, stated that compared to other major central banks, the Federal Reserve remains relatively accommodative in its policy stance and is still in an overall "monetary easing mode." Against this backdrop, the possibility of further weakening of the US dollar has become a key focus for investors.
Disagreements within the Federal Reserve mean interest rate policy remains uncertain.
The latest minutes of the Federal Reserve meeting reveal that even though officials have decided to cut interest rates, there is still significant disagreement within the Fed regarding whether to continue adjusting rates. Some policymakers believe that after this (December) adjustment, interest rates may need to remain unchanged for a period of time to observe changes in economic data.
Meanwhile, according to the CME FedWatch tool, investors currently expect a greater than 80% chance that the Federal Reserve will hold rates steady at its meeting in late January, but other forecasting platforms believe that the possibility of another rate cut before the middle of this year remains high.
Increased political uncertainty draws attention to the dollar's hegemony.
Besides monetary policy itself, US political factors have also become a variable in the market. US President Trump's recent renewed pressure on the Federal Reserve has sparked discussions about the central bank's independence and policy direction.
Mark Sobel, a former U.S. Treasury official and U.S. president of the think tank OMFIF, pointed out that the impact of political factors on the international status of the dollar may be a long and slow process, but it is enough to put pressure on market sentiment.
Analysts: Loose monetary environment favors crypto assets
Many cryptocurrency market participants believe that once the Federal Reserve officially enters a cycle of interest rate cuts, the cost of capital will decrease, which will benefit the performance of risky assets, with Bitcoin often seen as a major beneficiary.
Timot Lamarre, head of market research at cryptocurrency custody firm Unchained, said that a shift to looser monetary policy means the market will have more abundant dollar liquidity, and Bitcoin usually reacts first in such an environment.
Owen Lau, Managing Director of Clear Street, also pointed out that interest rate cuts could be a major catalyst for the cryptocurrency market in 2026, potentially attracting retail investors back and increasing institutional investor participation in crypto assets.
