Behind the 87.4% probability of interest rate cuts: the crypto market is experiencing a "expectation exhaustion" crisis.

When the CME "FedWatch" pushed the probability of a 25 basis point rate cut in December to 87.4%, the market no longer faced the suspense of "whether to cut or not," but rather the harsh test of "what happens after the cut." This figure was refreshed on the morning of December 1, 2025, seemingly rolling out the red carpet for risk assets, but in reality, it may have already overdrawn the benefits to a dangerous edge.

The data itself is real: the probability of the Federal Reserve cutting interest rates by 25 basis points in December is indeed as high as 87.4%, while the probability of keeping rates unchanged is only 12.6%; the cumulative probability of a 25BP rate cut in January next year is 67.5%, and for a 50BP rate cut, it is 23.2%. However, what is more concerning is that the figure of 87.4% has been maintained for several days, indicating that the market has fully priced in the rate cut with real money — when consensus approaches 100%, real price fluctuations often stem from "worse than expected" black swans.

Illusion of Liquidity: Why Rate Cuts ≠ Inevitable Rise

History has proven that when a loose monetary policy cycle begins, the first wave of increases in the crypto market always occurs during the "expectation formation period" rather than the "realization phase." On December 19, 2024, when the probability of a rate cut soared to an absolute high of 98.6%, Bitcoin actually fell by 6% within 48 hours after the rate cut was implemented. This is because:

1. Arbitrage funds withdraw in advance: Institutions sell futures contracts and buy spot at the peak probability, completing basis arbitrage, with the moment of interest rate cuts being the time to close positions.

2. Risk premium reset: After the interest rate cut is confirmed, the market's focus immediately shifts to "how many more times next year". If the Federal Reserve's dot plot shows only 2-3 rate cuts in 2026, it will be significantly lower than the current market expectations, triggering a reversal in sentiment.

3. The logic behind the weakening of the dollar is questionable: while interest rate cuts do lower the dollar, if the European and Japanese central banks also engage in simultaneous easing, the relative strength of the dollar index may not align with the crypto market bull run.

Currently, although Bitcoin ETFs have returned to net inflows, the inflow of 71.37 million dollars on November 28 is merely a "hedge" against BlackRock's IBIT single-day outflow of 114 million dollars. Institutions are shifting positions rather than singing in unison.

The truth about ETF capital flows: who is buying, who is selling?

On the surface: ARKB has a net inflow of 88.04 million USD, and FBTC has an inflow of 77.45 million USD, indicating that institutions are regrouping.

The essence is: clients of BlackRock IBIT (pension funds, endowment funds) lock in profits at the end of the year, while clients of ARK and Fidelity (hedge funds, high-net-worth individuals) are betting on policy games. This is a turnover between "allocated funds" and "trading funds," not a frenzy of incremental funds.

A more accurate signal comes from the Coinbase premium index ending 22 days of negative values - this means that the selling pressure in the U.S. has eased, but it does not indicate a surge in buying. The return of the premium more reflects the sellers' reluctance to sell rather than aggressive buying from buyers. In the least liquid month of December, this "exhaustion of selling" can easily be portrayed as "revival of buying", but in reality, it is a fragile performance due to insufficient market depth.

Retail investors' fatal misconception: chasing high in "certainty"

A probability of 87.4% provides a sense of security for retail investors, while it serves as a risk alert for institutions.

• The options market has set traps: The BTC options expiring on December 27 on Deribit show that the open interest for call options is concentrated in the range of $95,000 to $100,000, while the put options are densely packed at $85,000. Institutions are capitalizing on retail investors' FOMO sentiment by selling out-of-the-money call options, and the premium income has become a stable cash flow in the bear market.

• The leverage washout is far from complete: Although the original text states "the leverage washout is complete," on-chain data shows that the perpetual contract funding rate remains high at 0.01%-0.03%, indicating that long leverage is still crowded. A true washout requires the funding rate to turn negative and liquidation volume to exceed $500 million, and the current conditions are not met.

• Technical Indicator Overbought Trap: The hourly RSI has reached 65, and the 4-hour RSI is approaching 70, entering "technical overbought" territory. Before macro events, overbought conditions often trigger profit-taking, leading to a quick pullback after a false breakout.

The dilemma for retail investors is that they take institutions' "hedging strategies" as "directional guidance" and mistakenly believe that consensus probabilities guarantee profits.

Scenario Simulation: Three Possible Paths and Countermeasures

Scenario A: In December, the interest rate cut by 25 BP as expected, the dot plot is dovish (probability 30%)

• Market Performance: BTC briefly surged to $93,500 before quickly retreating to $90,500, with ETH showing weak follow-up.

• Operation: Do not chase highs, wait for a pullback to add positions at $89,000; if holding spot, can sell December call options (Covered Call) above $93,000 to enhance returns.

Scenario B: Rate cut as scheduled but dot plot is hawkish (probability 50%)

• Market Performance: BTC plummeted to $86,500 after a false breakout above $91,500, while ETH remained relatively resilient due to the staking narrative.

• Operation: Set a take profit at $91,500 in advance, keep 50% cash; if it unexpectedly drops to $85,500, buy a 3-month call option (expecting another interest rate cut in Q1 2026)

Scenario C: Unexpected pause in interest rate cuts (Probability 12.6%)

• Market Performance: BTC dropped over 8% in a single day, testing the previous low of $81,000, ETH liquidated pledged leverage.

• Operation: In this scenario, do not bottom fish. Wait for the market to digest for 48 hours, then observe whether the dollar index breaks below 106 before deciding whether to enter the market.

Real Alpha: Layout in "Expectation Gap"

Instead of betting on an 87.4% consensus, it's better to look for asymmetric opportunities brought by the "expected difference":

1. Ethereum Staking ETF: If the SEC approves the staking feature before December 20, ETH will unlock the "bonded" logic, and funds may shift from BTC to ETH, leading to a decline in the BTC/ETH exchange rate. It is advisable to position in the ETH/BTC trading pair in advance.

2. The liquidity black hole of altcoins: Under the blood-sucking effect of mainstream currencies, small and medium market cap coins may suffer losses. However, Solana may rise against the trend due to its ETF expectations and on-chain activity, forming a "mainstream platform, altcoins performing" pattern.

3. Inter-Period Arbitrage: The current annualized basis between the December and March futures contracts is approximately 8%. If the basis expands to over 12% after a rate cut, one can sell the near-month contract and buy the far-month contract for arbitrage.

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Conclusion: 87.4% is the "exit ticket" for institutions, not the "entry ticket" for retail investors.

When the market is in a near-certain excitement for a rate cut, smart money is looking for unexpected pricing of "down but still falling" or "not cut but rising". The most dangerous decision for retail investors is to chase volatility at the highest probability point.

Operation Suggestions:

• Do not add positions above $91,500, this is the worst risk-reward ratio position.

• Use options to replace spot, buy call options with a strike price of $89,000 (premium approximately $1,200), locking in upside gains while controlling downside risk within the premium range.

• Pay attention to the PCE data on December 13. If the core PCE year-on-year is below 2.7%, the path for interest rate cuts in 2026 will open, and that will be the time to heavily invest.

The liquidity flood may indeed be here, but remember: in the Wall Street pool, retail investors are never the ones filling the water, but rather the ones knocked over by the waves. A 87.4% probability is merely an "invitation to fall into the trap" left by institutions for the market. The real winners are those waiting for a second confirmation as the probability drops from 87.4% to 60%. #成长值抽奖赢iPhone17和周边 #十二月降息预测 #反弹币种推荐 $BTC $GT $ETH