Crypto Market Pullback as Investors Await Federal Reserve and Bank of Japan Policy Decisions
The cryptocurrency market experienced a noticeable pullback earlier this week as investors adopt a cautious stance ahead of critical central bank announcements from the U.S. Federal Reserve and the Bank of Japan (BOJ). After a strong start to December that saw significant rallies across major crypto assets, market momentum softened amid growing uncertainty surrounding upcoming monetary policy moves.
Recent Performance of Major Cryptocurrencies
Bitcoin (BTC) currently trades around $92,368, reflecting a gain of approximately 3.11% amid volatile market conditions. Ethereum (ETH) holds steady at roughly $3,242, up 2.54%, while Solana (SOL) demonstrated robust performance climbing 6.29% to $138.95. Other altcoins such as PEPE, SHIB, DOGE, and XRP also posted moderate gains between 2.4% and 3.4%, with XRP priced near $2.04. Ethereum gas fees remain low at 0.09 gwei, indicating relatively inexpensive transactions on the ETH network despite some market turbulence.
Market Drivers and Recent Trends
The early December crypto rally was fueled primarily by two factors: a substantial purchase of nearly $960 million worth of Bitcoin by Strategy, and anticipation surrounding the much-anticipated Fusaka upgrade scheduled for December 3. These catalysts helped Bitcoin push toward the $94,000 level, with Ethereum rallying near $3,250. However, once those events passed, bullish sentiment rapidly waned. During Friday’s U.S. trading session, aggressive sell-offs emerged, reversing some of the week’s gains. Although markets saw a minor rebound over the weekend, the recovery lacked momentum going into Monday. According to research from Laser Digital, this pattern of short-lived rallies followed by quick pullbacks has become typical behavior in the crypto markets in recent months.
Macro Environment Adds Pressure
The pullback coincides with a broader macroeconomic backdrop of rising bond yields and shifting monetary policy expectations. In Japan, the 10-year government bond yield recently breached 1.90%, reaching a 30-year high. This surge stems from increasing odds that the Bank of Japan will implement a rate hike in December, compounded by worries over a larger-than-expected supplementary budget for fiscal year 2025 and anticipated spending in fiscal year 2026. Meanwhile, the U.S. 10-year Treasury yield climbed above 4.10% as markets brace for the Federal Reserve’s upcoming policy meeting. Expectations are increasing for a “hawkish cut” — an interest rate reduction accompanied by firm forward guidance — which appears to be dampening risk appetite across asset classes, including crypto.
Divergence Between Equities and Crypto
Bitget CEO Gracy Chen highlighted a divergence in risk sentiment between the equity and crypto markets. According to CME Group’s FedWatch tool, futures traders see nearly a 90% probability of a 25 basis point Fed rate cut, a sharp increase from less than 40% just weeks ago.
Despite this, the S&P 500 is up nearly 17% year-to-date and rests within 4% of its October peak. However, recent fund flows show $3.5 billion exiting U.S. equity funds last week, even as global funds added $7.9 billion. Cryptocurrencies have been comparatively weaker, reflecting cautious investor sentiment.
Chen suggested that should the Fed deliver a rate cut as widely expected, Bitcoin could regain upward momentum and potentially return toward the $94,000 to $96,000 range. Conversely, a more measured or cautious Fed stance could prompt BTC to dip back into the $80,000 territory.
Volatility and Event Risk Remain Elevated
Options markets are pricing in increased volatility ahead of a heavy central bank calendar, with the Federal Reserve scheduled to announce its decision on December 10, followed by the Bank of Japan on December 19. Additionally, two major U.S. labor reports will provide further economic signals in the interim.
Laser Digital’s analysis indicates that price action is likely to remain choppy through this period, as markets focus heavily on the Fed’s updated Summary of Economic Projections (SEP) and any revisions to the terminal rate path. These factors could significantly influence year-end positioning and market direction.
While spot volatility in cryptocurrencies like Bitcoin and Ethereum has eased somewhat from recent peaks, event risk premiums remain elevated. For example, Bitcoin’s volume volatility trades around the 45-volatility handle, Ethereum at about 70-volatility, with event-driven implied volatilities rising ahead of major announcements.
Outlook
With major central banks set to reveal policy decisions imminently, investors in cryptocurrencies are bracing for potential turbulence. The interplay between easing inflation trends, macroeconomic data, and central bank signaling will continue to shape market sentiment. The crypto market’s typical quick shifts in momentum highlight its sensitivity to external economic drivers and underscore the importance of closely monitoring upcoming events.
This article is based on market data and analysis available as of December 9, 2025. Investor sentiment and asset prices remain subject to rapid change depending on economic developments and policy outcomes.