Fed Consensus Breaks Down: Has the December Rate Cut Become Unrealistic? After the Crypto Market Crash, the Fed's Next Move Matters Enormously

[SuperEx_Media ✔️]

#Fed #CryptoMarket

Yesterday, in the article “Bitcoin Drops Below $90,000: Is This a Bear Market Confirmation, or the Beginning of a ‘Discount Period’?”, we mentioned that over the past month BTC has fallen from its all-time high of $126,000 all the way down below $90,000. A 25% pullback has thrown the market into panic, and the fear index has dropped into single digits. Over the last 41 days, the crypto market has seen more than $1.1 trillion in market cap evaporate, with average daily losses as high as $27 billion.

All of this data tells us one thing: the crypto market is currently in the middle of a violent storm. At such a moment, the Fed’s internal “infighting” and Trump’s continuous pressure on the Fed are undoubtedly pushing this crypto storm to an even higher level. The reason is very simple: whether you like it or not, the Federal Reserve has already become the “hidden boss” behind the entire crypto market.

Bitcoin is decentralized, but investors’ money is not. Liquidity in the crypto market does not appear out of thin air; it comes from the world’s core U.S. dollar system — and the Fed is the central brain of that dollar system.

So:

• Rate hikes → the dollar becomes more expensive → liquidity in risk assets dries up → the crypto market crashes
• Rate cuts → the dollar becomes cheaper → liquidity flows back into tech and crypto → markets rebound
• Balance sheet reduction (QT) → capital is pulled out → the crypto market feels “starved of oxygen”
• Balance sheet expansion (QE) → capital flows back in → the long-term bull cycle restarts

Of course, reality is far more complex than the simple picture above. But what you must remember is: behind every candlestick you see, it’s never just retail traders — it’s the fluctuation of the global cost of capital structure.

Why Write This Article at This Moment? — Because the December Crash Changed Everything

In yesterday’s article, we already analyzed that:

• Liquidity contracted rapidly in Q4
• Crypto capital is clearly retreating
• Large VCs and institutions are cutting positions
• BTC and ETH have suffered structural breakdowns
• The market cap of stablecoins has fallen sharply

All of this is inseparable from the Fed’s monetary policy shift since the second half of 2025.

So the question now is no longer: “Does the Fed affect the crypto market?” The real questions are: “What will the Fed do next? And how should the crypto market respond?”

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Starting from the Fed’s “Infighting”: From Hawks vs. Doves to Internal Fracture — Why Has It Suddenly Become So Hard to Reach Consensus?

The Fed’s traditional culture is built around “a unified voice behind high walls.” The Chair’s public remarks usually have the support of a majority of the Committee; internal disputes are pushed down to the lowest possible level, and a unified front is used to stabilize markets.

But this year, three major anomalies have appeared:

1. Economic Data Now Sends “Offsetting Signals” — There’s No Place to Put Consensus

From Q3 to Q4 2025, the U.S. economy has shown a rare “two-headed contradiction”:

• Inflation remains sticky → in theory, they shouldn’t be cutting rates
• Employment is cooling rapidly and hiring is slowing → yet they must cut rates to avoid a hard landing

This is not a one-sided risk; it’s a “fight with both hands.” The more contradictory the data, the harder it is for the Fed to reach a common judgment. This has created two opposing camps:

(1) The hawkish camp:

• Inflation is still above the threshold
• A new round of tariffs could push prices higher
• Cutting rates now risks repeating the mistakes of the 1970s

(2) The dovish camp:

• The labor market is cooling sharply
• Confidence indicators are falling, suggesting consumption has peaked
• Keeping rates high will crush low- and middle-income households

In the past, the consensus was “inflation first.” But now that both risks are present at the same time, both camps feel they are the ones who are right.

2. Three Fed Governors “Think the Same Way,” Forming an Independent Bloc

What’s special about this year is that three voting members of the Board were nominated by the same president and have highly aligned ways of thinking — something rarely seen in the past decade. Their general mindset looks like this:

• A deeper focus on employment
• They do not believe inflation will re-accelerate sharply
• They are strongly concerned about the structural damage caused by prolonged high rates

When three votes form a solid bloc, the Chair immediately faces resistance when trying to push for a unified action. In other words, a “stable minority” has emerged inside the Fed — and once a minority becomes stable, it is no longer just a minority; it becomes a blocking force.

3. The Chair’s Authority Is Being Eroded: Internal Disputes Exposed, External Political Pressure Rising

What the Fed fears most is the market starting to doubt whether “the Chair can still balance internal forces.” And yet this year, three unprecedented phenomena have occurred:

• Committee members are openly expressing differing opinions
• The Chair’s view no longer automatically represents “consensus”
• The President has repeatedly attacked the Chair in public

This means that the Fed’s institutional trust is being weakened. The issue is no longer just a disagreement over one particular decision, but a fundamental erosion of trust. Without trust, there can be no consensus.

Especially the Third Point: The President’s Public Attacks on the Chair Have Put Powell in a Very Passive Position

In this cycle’s abnormal Fed situation, there is one external variable that must not be underestimated: Trump has repeatedly mocked Powell in public, even directly attacking the Chair and hinting at replacing him. Such attacks are not unheard of, but the timing is extremely sensitive:

• Powell’s term only has a few months left
• The Fed is already internally divided
• The December meeting is a key inflection point
• Candidates for the new Chair are already in the selection process

This has led to a rarely discussed but very real phenomenon: the Fed is slipping into a “transition mindset.” Once any institution enters this mindset, three things happen simultaneously:

• No one wants to be responsible for aggressive decisions
• No one wants to be seen as a political tool
• The authority of the sitting Chair and the power of future candidates are weakened at the same time

The Fed is exactly in this “squeezed in the middle” position.

More importantly, when a President openly talks about a “shortlist for the next Chair,” everyone inside the Fed starts reassessing their own position. This leads to short-term behavioral distortions:

• Hawks become more hawkish, to avoid looking like they’re “cooperating with politics”
• Doves become more dovish, to emphasize the long-term legitimacy of the employment mandate
• Centrists become more cautious, to avoid picking the wrong side

In short: policy preferences are becoming politicized. This further tears apart an already fragile consensus.

The earlier a December rate cut happens, the more likely it is to be seen as “part of the new Chair’s legacy.” No one wants to carry that burden right before a power transition.

Therefore: the closer the Fed gets to a leadership change, the more inclined it is to keep policy unchanged.

Why Is a “Fed in Infighting Mode” Amplifying Systemic Risk in the Crypto Market Right Now?

Unfortunately, at the worst possible moment in 2025, significant divisions have appeared inside the Fed, and the impact on the crypto market is direct — it is clearly amplifying systemic risk. Based on the analysis above, you can think of today’s Fed like this:

• One camp wants to continue tightening: afraid of a second wave of inflation
• One camp wants to start cutting: afraid the economy and markets are already being choked
• The middle camp swings back and forth: trying to balance “recession risk” vs. “inflation fear”
• With a leadership transition coming, all three camps, on the whole, lean toward keeping policy unchanged.

And this kind of directional uncertainty hits the crypto market much harder than you might think.

1. Internal Division Means the Market Cannot Price the Future Path at All

Traditional finance can still use models to estimate the rate path, but the crypto market doesn’t have such a buffer mechanism. One sentence from the Fed can send BTC down 5% in an instant.

If two groups of Fed officials say completely opposite things? Then: markets lose direction, crypto loses liquidity, and volatility gets infinitely amplified.

When expectations cannot be anchored, the most fragile segment — altcoins — is the first to suffer. Those sudden flash crashes and midnight wicks you see are not just “whales playing games,” they are the direct reaction to expectation collapse.

2. The Bigger the Disagreement, the More Unstable the Policy Turn: Crypto Fears “Unclear Inflection Points” the Most

What is the real switch that turns on a bull market?

• Not ETFs
• Not halving
• Not narratives

It is the clear turning point when Fed policy shifts from tightening → easing.

But the current problem is: if the Fed itself cannot reach an internal consensus on direction, how can markets position ahead of time? This leads to two outcomes:

1. Capital doesn’t dare to come in — liquidity in major coins dries up

 As on-chain data shows, total stablecoin supply has been declining for months, and risk appetite is in the lowest zone.

2. The leverage system becomes unbalanced — $100–300 million liquidations can happen at the drop of a hat

Policy uncertainty → loss of directional conviction → all leverage is reduced to short-term speculation, making the market even more fragile.

3. Conflicts Between Officials Make the Crypto Market More Dependent on “Surprise Headlines”

In the past, the market only needed to watch:

• FOMC meetings
• CPI
• Employment reports

Now it’s different. Because the factions within the Fed are no longer in sync, any public remarks by an official can completely disturb the market.

This has pushed the crypto market into an extremely unstable state where:

• Headlines matter more than on-chain fundamentals
• Fed speeches matter more than BTC’s technicals
• A single comment can directly flip the day’s direction

Final Thoughts

The Fed determines global liquidity → liquidity determines the direction of the crypto market. The 2025 crash has made one thing crystal clear: if you’re in crypto and you don’t understand macro, you’re flying blind. Over the next six months, the Fed will once again be the absolute core variable for the entire crypto market.

SuperEx will continue to provide:

• Updated policy analysis
• On-chain data
• Exchange liquidity trends
• Structural changes in the crypto market

to help every user find the clearest possible direction in the most complex macro environment. Please stay tuned to SuperEx media.