What does the Federal Reserve's disagreement on a 2026 rate cut mean for cryptocurrencies?

Author: Martin Young, CoinTelegraph; Translator: Deng Tong, Jinse Finance

The Federal Reserve has had a significant impact on the cryptocurrency market this year, and this influence may continue into 2026 due to ongoing disagreements among policymakers.

The Fed cut interest rates three times in 2025, most recently on December 10, lowering rates to between 3.5% and 3.75%.

However, while rates remain at their highest levels since 2008, forecasts suggest only one more rate cut is likely in 2026.

Key factors influencing policymakers' decisions include labor market data, the inflation trajectory (especially the impact of tariffs), and overall economic growth.

Federal Reserve Chairman Jerome Powell's term ends in May, at which time the Fed will welcome a new chairman. President Donald Trump has begun searching for the candidate most likely to take a dovish stance.

Despite three rate cuts this year, US interest rates remain at their highest level in 18 years. Source: Macro Trends. What actions will the Federal Reserve take in early 2026? The Federal Reserve will hold its next meeting on January 27-28, which will be the first time the Fed Governors have updated policy guidance, and this guidance is likely to set the tone for this quarter. Data from CME Group shows that investors predict only a 20% probability of the Federal Reserve cutting interest rates by 25 basis points again in January, while the probability of a rate cut at the Fed meeting in mid-March has risen to 45%. The dot plot shows divergence. The December 2025 dot plot shows the interest rate forecasts of each policymaker, revealing significant divergence. The number of people predicting 0, 1, or 2 rate cuts is roughly equal, creating significant uncertainty for the market in early 2026. The chart clearly illustrates the Fed's thinking, but forecasts often change as new economic data emerges. The current median forecast for the end of 2025 is 3.6%, essentially unchanged from current levels; the median forecast for the end of 2026 is 3.4%, implying only one rate cut in 2026. The December dot plot shows policymakers' divergent forecasts for interest rate trends at the end of 2026. Source: Federal Reserve. Analysts at Charles Schwab said after the Fed's December rate cut that "the updated forecasts are not particularly hawkish," with 12 of the 19 policymakers expecting at least one more rate cut next year. Analysts hope for two rate cuts in 2026. CoinEx Research Chief Analyst Jeff Ko points out that the Federal Reserve is "facing serious internal divisions," with the dot plot showing "significant differences in opinion and no clear consensus on the interest rate path in 2026." "I think the Fed is likely to cut rates twice in 2026. The Fed might pause rate cuts in January, then cut rates once in March, which would continue for the remainder of Powell's term, ending in May." "If labor market conditions remain weak, even if inflation may exceed 3% in the second quarter, such a timing of rate cuts would be reasonable. After the leadership transition, the new Fed leadership is likely to continue gradually easing monetary policy for the remainder of the year." BTSE Exchange Chief Operating Officer Jeff Mei points out that several scenarios could occur with the Fed in the first quarter. "The most basic scenario is that the Fed cuts rates once in the first quarter and maintains the current scale of Treasury repurchase agreements, which would release some liquidity into the market, benefiting cryptocurrency inflows," he said. "In a bull market scenario, if inflation falls and unemployment rises, the Fed will have to take more aggressive measures, cutting rates twice and increasing Treasury repurchase operations. The cryptocurrency market will benefit from this, as demand for risk assets will surge." However, in the worst-case scenario, if inflation picks up again, the Fed will be forced to completely stop cutting rates and repurchasing Treasury bonds. He added that this concern could lead to a crash in both the stock and cryptocurrency markets. Hopes for Fed policy in 2026 have diminished. Justin d'Anethan, head of research at Arctic Digital, said: "Most people had high expectations for the end of quantitative tightening and the possibility of a new dovish era for the Fed." "However, most people are disappointed because the Fed, while seemingly accommodative, remains very cautious," he added. "For an asset that can essentially hedge against reckless central bank policies, fiat currency devaluation, and ultimately global market liquidity, this more cautious approach dampens the frenzy (or once was) anticipated by most cryptocurrency traders." Nevertheless, the new chairman may alter the Fed's overall interest rate policy stance and its willingness to support risky assets like cryptocurrencies. When interest rates fall, investors tend to seek higher-risk assets like cryptocurrencies as traditional investments such as bonds and time deposits become less attractive. This increases demand and buying pressure, and prices typically fall accordingly.