Why did Bitcoin drop today? FOMC minutes reveal fierce disagreements; a rate pause may occur in 2026.

December 31, Bitcoin fell to around $88,330, after briefly breaking above $89,000 overnight. The Federal Reserve December meeting minutes show that although the FOMC approved a 25 basis point rate cut with 9 votes in favor and 3 against, several officials admitted the decision was “quite close,” with some members leaning toward pausing rate cuts after this move. The minutes also mention that Trump’s tariffs have driven inflation higher, and the cryptocurrency fear index dropped to 29, reflecting market caution.

Fed Rate Cut Narrowly Wins, Revealing Policy Path Uncertainty

The core reason for Bitcoin’s decline today lies in the rare intense disagreement revealed in the Fed’s December 30 meeting minutes. Although the committee ultimately approved a 25 basis point decrease in the federal funds rate to 3.5%–3.75% with 9 votes in favor and 3 against, this was the most dissent since 2019. More importantly, the minutes show some officials supporting the rate cut also acknowledged that the decision was “very delicate,” and some might even prefer to keep rates unchanged.

The minutes state: “A minority of officials supporting a rate adjustment at this meeting indicated that they viewed this decision as very close, or that they could also support maintaining the target range.” This “narrow victory” in rate cut decision signals significant disagreement within the Fed about future policy paths. As investors realize the likelihood of further rate cuts has significantly decreased, risk assets naturally come under pressure.

Regarding future rate cuts, some officials believe the Fed may need to hold rates steady for a period after this cut to observe whether inflation continues to approach the 2% target. The opposing camp is more concerned that inflation progress may stagnate in 2025, and they believe more evidence is needed to confirm that inflation can “sustainably” decline. This cautious attitude weakens market expectations of easing liquidity, directly pressuring Bitcoin and other risk assets.

The dot plot shows that most of the 19 officials expect the Fed to cut rates again in 2026 and 2027, gradually guiding the federal funds rate toward a neutral level near 3%. This “slow rate cut” path is far less aggressive than market previously anticipated, and is a key reason why Bitcoin declined today.

The minutes also mention that Trump’s tariff policies are pushing inflation higher, but most believe the impact may be phased and could weaken gradually by 2026. However, this uncertainty itself constitutes a risk premium, leading investors to reduce positions and hedge risks at year-end.

Market Sentiment Remains Cautious, but Institutions Continue to Accumulate

Cryptocurrency fear and greed index hovers at 29, indicating cautious market sentiment. The altcoin seasonal index is at 19, showing that a large amount of capital remains concentrated in Bitcoin rather than diversified across other cryptocurrencies. Data from crypto ETFs show net outflows on December 29, clearly indicating investor concern about future trends. This cautious mood is especially evident at year-end, with many traders taking profits or reducing positions to迎接新年.

Nevertheless, the total market cap of cryptocurrencies remains stable at about $2.98 trillion, indicating that capital is still flowing within the system, just at a slower pace. Bitcoin’s market share continues to expand, clearly showing it is becoming the preferred safe-haven asset. When market uncertainty rises, investors tend to shift funds from high-risk altcoins into Bitcoin, a typical defensive market rotation.

Institutional and Retail Behavior Diverge

Retail sentiment: Fear index at 29 reflects caution, ETF net outflows indicate year-end profit-taking

Institutional actions: Metaplanet invested $451 million to add 4,279 BTC, holding a total of 35,102 BTC

Profit data: Metaplanet has gained 568% profit from Bitcoin investments this year, validating the effectiveness of long-term strategies

Japanese-listed company Metaplanet just purchased 4,279 BTC, worth about $451 million, bringing its total holdings to 35,102 BTC, valued at roughly $3 billion. Over the year, this investment has yielded a 568% profit, demonstrating that institutions are actively positioning for long-term growth. Metaplanet used funds from selling preferred shares to buy more Bitcoin, showing their focus on long-term prospects and serious engagement with the Bitcoin market.

This divergence between institutional and retail behavior is a key reason why Bitcoin is down today but has not collapsed. Retail investors are choosing to wait or exit amid uncertainty, while institutions increase their positions during price pullbacks. This structural buying support helps Bitcoin form a relatively solid support zone around $88,000.

Technical Compression Pattern Suggests Imminent Direction Choice

(Source: Trading View)

From the chart, Bitcoin has been trapped in a large symmetrical triangle since early December, with prices bouncing off the triangle’s bottom and not making significant progress. Trendlines are tightly converged, and short-term momentum appears quite flat. Overlapping candlesticks and spinning tops indicate neither side has much energy flowing. This technical structure signals that Bitcoin is in a compression phase rather than a weakening phase.

All moving averages are clustered around the $88,000 level, forming a barrier preventing further upward movement, and RSI hovers near the middle, a classic sign of indecision. If the price ultimately breaks above $90,000, it could target $92,200, and possibly retest the high at $94,600. Conversely, if the close falls below $85,100, further decline toward $81,600 is possible.

In any case, this is a very interesting entry point, as the price is in a poised state, ready for explosive growth at any moment. Bitcoin is entering a consolidation phase toward the end of 2025, rather than a crash or frenzy, as the market awaits a clear direction.