Bitcoin's latest rally comes as traders raise the possibility of a Federal Reserve interest rate cut in December, the dollar weakens and attention turns to who will lead the central bank after Chairman Jerome Powell's term ends in 2026. Futures markets raised the probability of a 25 basis point rate cut this month to the mid-to-high 80s, coinciding with easing financial conditions and a nine-day decline in the dollar.
The move helped push Bitcoin back towards $93,000 from a range of $84,000 to $87,000 after a volatile November that saw wild swings in leveraged crypto products and proxy stocks.
Spot levels hovered around $92,300 in mid-week trading, while the 10-year Treasury yield held steady around 4.1%, consistent with the historically risk-on attitude of cryptocurrencies overall.
Fed's “shadow chair'' observation provides new opportunity
This policy story provided a second impetus. According to Reuters, President Trump plans to nominate a candidate for Fed chair in early 2026, before Powell's term ends on May 15, 2026.
Reports have pointed to Kevin Hassett, a former White House economist and former Coinbase advisor, as a top candidate, with Fed Board Director Christopher Waller, Vice Chair for Oversight Michelle Bowman, former Governor Kevin Warsh, and BlackRock's Rick Rieder also in discussion.
Prediction market pricing has tilted toward Mr. Hassett as traders plot a more accommodative policy path for next year, but it won't affect the actual vote until which candidate is confirmed and wins the seat.
The Fed has noted that Powell's current term as chairman ends in May 2026, and that he may remain in office until January 31, 2028.
Sequence matters for Bitcoin, as the impact through mid-2026 will be driven by expectations and financial conditions rather than short-term policy changes.
Markets are already moving towards an easing stance as the probability of a December rate cut increases, the dollar weakens and long-term yields stabilize.
This interest rate drive explains much of the crypto rally, and the chairman's chat reinforces the same theme by encouraging investors to price more on the likelihood of a dovish successor.
Positioning also helped. BTC fell throughout November as the US Spot Bitcoin ETF faced heavy redemptions, but rebounded sharply as short covering responded to the dollar's weakness.
The large outflows in November, following a single-day record at the beginning of the month, left room for a mechanical rebound once macro pressures eased.
Federal Reserve candidates: What their views mean for interest rates, the dollar and Bitcoin
The candidate combination includes a variety of reaction functions that investors have already mapped onto the forward curve. Hassett insisted in a recent interview that inflation is “quite low” and has urged faster rate cuts, but investors see this stance as accommodative and could weigh on the dollar if adopted by Fed leaders.
Incumbent Governor Waller recently advocated for a rate cut in December, saying his decision would depend on data.
Mr. Bowman has supported gradualism from the perspective of fiscal stability. See her statement here.
Warsh, a former bank governor and longtime critic of balance sheet expansion, is likely to be read as taking a more assertive stance on inflation and the pace of outflows.
Mr. Rieder has emphasized the maintenance of plumbing in the market and has also promoted reductions in light of the housing crunch.
These profiles are most important for the period premium and dollar until 2026, but are already shaping the cryptocurrency sentiment through discounted liquidity conditions.
Short-term macro channels remain dominant.
The increasing probability of a December rate cut coincides with a weaker dollar and stable real yields, conditions that have historically supported BTC beta.
If these odds rise further in policy statements and outlooks, a weak dollar and accommodative financial conditions will continue to provide tailwinds.
Conversely, a hawkish surprise or an upward inflation shock would strengthen the dollar, push yields higher and weigh on risk assets, including cryptocurrencies.
After November's outflows, a sustained reacceleration of net inflows will ensure a recovery and absorb supply from profit-taking miners, while continued redemptions will cap upside even if macroeconomic conditions remain supportive.
The timing of confirmation also softens the leadership story. Trump's planned “early 2026” announcement means months of hearings and Senate dynamics before a speaker is seated.
Until then, Powell and the current board will lead policy. Therefore, the practical impact on Bitcoin is the “shadow chair” effect. The market adjusts the curve and the dollar based on the perceived bias of the putative successor, and cryptocurrencies trade those changes.
Investors say Hassett's choices could put a last-minute squeeze on the dollar, especially when combined with guidance to continue bringing forward cuts and quantitative tightening on a gradual glide path, according to Reuters.
Warsh's drumbeat suggests the opposite through its long-term high price stance and potential focus on balance sheet outflows.
What happens next: The Fed Chair’s path to 2026 and why it matters for BTC
The most obvious hinge for charting a path to 2026 is the link between rates, USD, and BTC. With 10-year yields nearing 4.1% and the dollar easing, cryptocurrencies are trading on a classic liquidity impulse that could persist without the need for any Fed changes.
Chair races are additive because they tweak the same variables by changing expectations about next year's policy mix.
| scenario | Chair results and bias | Policy path to 2026 | USD | 10 years seconds | BTC framing (tactics, not advice) |
|---|---|---|---|---|---|
| dovish continuity | Mr. Hassett or Mr. Reeder, mitigating prejudice. | Expansion of relaxation by 25 to 50 bps from current pricing | softer | Decrease to stability | Risk-on bidding if ETF flows accelerate again |
| Data-dependent glide | waller or bowman, increment | Significantly lower truck futures | limited range | ～3.9～4.3% | Chop related to macro vibration and flow |
| hawkish pivot | Warsh or re-acceleration of inflation | Delay in reduction, prioritizing balance sheet | more solid | higher yield | Risk avoidance across cryptocurrencies |
First, CME FedWatch's December decision and economic forecast summary could determine the direction of the dollar and long-term interest rates.
Second, daily ETF net flows from trackers such as Farside and weekly ETP snapshots from CoinShares will indicate whether the rebound can attract sticky demand.
Third, White House signals that narrow the shortlist will guide curve positioning, with Hassett's drumbeat tilting toward a weaker dollar and Warsh's drift pointing in the opposite direction.
Investors are already discussing how the Hassetts Fed will affect the currency, according to Reuters. At the same time, the Wall Street Journal's commentary on Warsh emphasizes a tougher stance on balance sheet policy.
The throughline for crypto readers is simple. The latest BTC rally has largely coincided with interest rate trading rather than retail trading, and the chairman's story will largely depend on how it shapes the dollar and yields by the time his successor takes the gavel in May 2026.
