Fed Rate Cuts Set to Provide Crypto Tailwind in 2026, Analysts Say

Source: DefiPlanet Original Title: Fed Rate Cuts Set to Provide Crypto Tailwind in 2026, Analysts Say Original Link:

Quick Breakdown

• The December Fed rate cut lowers the funds rate to ~3.5–3.75%, signalling at least three more cuts in 2026.
• End of QT, TGA drawdown, and depleted RRP create first net-positive liquidity backdrop since 2022.
• Crypto and other duration-sensitive assets could benefit as policy shifts from headwind to mild tailwind.

Analysts say the Federal Reserve’s recent 25 basis-point cut in December, which brought the federal funds rate to roughly 3.50–3.75%, may create a more favourable backdrop for cryptocurrencies in 2026.

Fed rate cuts could boost crypto in 2026

The forward curve now prices at least three additional cuts through the year, potentially pushing rates into the low 3% range by year-end. The end of quantitative tightening (QT) on December 1, combined with a planned drawdown of the Treasury General Account (TGA) and the depletion of the Reverse Repurchase Program (RRP), creates the first net-positive liquidity environment since early 2022. Analysts note that this shift marks the transition of monetary policy from a headwind to a mild tailwind for risk assets, including digital currencies.

Liquidity boost and controlled policy descent

SOFR and fed funds have drifted toward the high 3% range, while real rates have rolled over from peaks seen in 2023–2024. The current environment is described as a controlled descent rather than an abrupt pivot, reducing the risk of market shocks. Improved liquidity and easing financial conditions could encourage both institutional and retail investors to increase crypto exposure.

Assets with strong structural demand, such as Bitcoin, major altcoins, and duration-sensitive digital products, are expected to benefit first. The combination of predictable monetary policy and renewed liquidity may accelerate adoption and trading activity across the crypto ecosystem.

With clear signals from the Federal Reserve and a supportive liquidity backdrop, 2026 could mark a turning point for digital assets, reversing the challenging headwinds of recent years and offering a fresh tailwind for cryptocurrencies.

Following the comments from Federal Reserve officials, Bitcoin (BTC) is showing tentative signs of stabilization. Traders are now pricing in a roughly 75% probability of a rate cut next month, up from 30–40% just last Thursday. This shift signals a potential macro tailwind for the largest cryptocurrency, reinforcing the possibility of a stronger 2026 for digital assets.