BTC's Worst Quarterly Skid Since 2018 Faces a Policy Lifeline as Fed Rate-Cut Odds Soar

Bitcoin has chalked up four consecutive weeks of losses, representing its most extended bearish stretch since mid-2024, though the cryptocurrency has started finding its footing after hitting $82,100 on November 21. The asset is on pace to finish the quarter down 24.43%—a performance that hasn’t been seen since 2018’s crypto winter. Currently trading near $94.19K with modest 24-hour gains of 0.22%, the digital asset appears caught between mounting headwinds and emerging signs of accumulation.

The Policy Tailwind: Why December Matters

The narrative shifted dramatically this week as Federal Reserve expectations underwent a significant recalibration. Market pricing now reflects a roughly 70% probability of a December rate cut—a dramatic swing from 40% just seven days prior. This policy pivot has provided psychological support to risk assets, though Sean Dawson, research lead at derivatives platform Derive, advises caution. “Pessimism has likely peaked, but traders should watch for bear traps,” he cautioned, emphasizing that traditional headwinds remain intact.

The Fed’s scheduled conclusion of quantitative tightening on December 1, followed by its December 10 rate decision, creates critical inflection points for markets. However, Dawson notes an often-overlooked complication: despite growing rate-cut expectations, sticky inflation readings could delay the transition to full quantitative easing—keeping policy trajectory uncertain.

On-Chain Signals Suggest Accumulation Strength

Beneath surface-level price weakness, important accumulation signals are emerging. The aggregate spot bid-ask delta at 10-depth has surged to its second-highest reading of the year, indicating aggressive dip-buying and strong absorption of selling pressure. This metric historically precedes significant rallies—a similar spike during the March-April downturn preceded a 64% advance.

Structural Headwinds Persist Despite Rebound

Despite Bitcoin’s 6% recovery from its November lows and 6.27% weekly gain, several structural challenges remain unresolved. Digital asset treasuries continue trading below net asset value, constraining their purchasing power. Simultaneously, spot Bitcoin and Ethereum ETF flows remain negative, suggesting institutional hesitation. These dynamics create an asymmetric risk environment where recovery momentum could face resistance.

The Options Market’s Dark Warning

The derivatives market paints a cautious picture. Traders have been accumulating put positions at an accelerated pace, particularly for December-dated contracts in the $80,000 to $85,000 strike range. This positioning suggests market participants are hedging against meaningful downside, despite the recent sentiment improvement.

Dawson’s base case reflects this ambiguity: “I wouldn’t be shocked if Bitcoin temporarily dips into the $70,000s before finding stability around $90,000 by year-end, assuming the Fed remains accommodative.” His more bullish longer-term view targets $100,000 by Q1 2026, but the path remains volatile.

What’s Next: Fed Decisions Drive Near-Term Direction

Market sentiment, while still entrenched in “extreme fear” territory, has begun thawing slightly following the recent price bounce. However, recovery durability depends entirely on policy direction. The Fed’s December announcements will likely serve as the primary catalyst, determining whether Bitcoin’s current rebound reflects genuine institutional re-engagement or merely a tactical oversold bounce awaiting another test of lower levels.

For now, the cryptocurrency remains caught between improving rate-cut odds and persistent microstructure concerns—a tension that will likely define trading dynamics through year-end.