The Fed's Cautious Two-Step While Markets Watch the Clock

There's a peculiar energy in markets right now—the kind where good news and bad news swap places depending on which chart you're staring at. The Fed just cut rates for the third time this year, but somehow equities took it on the chin. Bitcoin is nervously circling $91,000 like a cat that can't decide whether to jump down from the counter. And somewhere in the wings, crypto-linked advisors are supposedly leading the Trump economic team. It's the kind of market moment where everyone's holding their breath, waiting for the other shoe—or maybe the entire closet—to drop.

Let's start with what nobody's talking about loudly enough: the December Fed decision wasn't actually a done deal, and everyone knew it going in.

The FOMC minutes released this week revealed something that markets glossed over during the chaos of the rate cut announcement. Fed officials held "strongly differing views" about whether December was even the right time to cut. Beth Hammack, the Cleveland Fed president, had been unusually direct in November, essentially saying she couldn't find a good reason to loosen further. Others on the committee genuinely worried that cutting rates into a resilient economy with sticky inflation looked like an act of capitulation.

Powell's language afterward—"today was a closer call but we decided it was the right call"—wasn't bureaucratic throat-clearing. It was admission that his committee nearly split on this one.

But here's where it gets interesting. The Fed's Summary of Economic Projections showed upward revisions to 2025 GDP growth to 2.1% and upward revisions to core inflation to 2.5%, yet they still pulled the trigger. Translation: the economy isn't weak. Inflation isn't crumbling. But they cut anyway—and then signaled they're probably done cutting for a while.

The dot plot indicated only two rate cuts expected in 2025, down from four projected back in September. That's not a pivot. That's a retreat disguised as patience. Markets got spooked because Powell's playbook appears to be "one more cut to show we're data-dependent, then we sit back and watch." Investors hate uncertainty more than hawkishness; at least with hawks you know where you stand.

The equity market's 3% swoon immediately after the announcement tells you everything about where sentiment actually is. We're not in a "rate cuts fix everything" paradigm anymore. We're in a "rates probably stay higher for longer" regime, and the market's just had to reckon with that reality.

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Now, if you want to see where real volatility is brewing, don't look at the 10-year Treasury. Look at crypto.

Bitcoin's been treading water in the low $90Ks, and there's a reason nobody's comfortable with that level. A $15.4 billion options expiry is hitting this Friday, with Bitcoin's max pain at $100K and a put/call ratio of 0.58. For the uninitiated, that's heavy put positioning—people are protecting themselves against downside. The usual mechanical dance around large expirations could push volatility into overdrive, but the bigger issue is that Bitcoin hasn't actually recovered its mojo.

Down 24% from October's all-time high near $126,000, Bitcoin's correction doesn't read as catastrophic in a historical context. But it sure feels that way. JPMorgan launched a leveraged structured note tied to BlackRock's Bitcoin ETF, offering 1.5x upside by 2028, which is Wall Street's version of "we believe in the cycle, we're just going to charge you to believe in it with us." Translation: institutions are positioning for upside, but they're not rushing in.

The interesting subplot: an Ethereum whale that accumulated ETH back in 2016 at $203 per coin has started selling again, moving 6,000 ETH to Wintermute since November 17 for an average of $3,026.77 per coin. Nine-year hold, locking in a 1,391% return. That's not panic selling; that's an OG taking their chips off the table after a decade-long ride. When the pioneers start heading for the exit, at least the veterans among us notice.

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Here's what bugs me most about this moment: the policy circus is still underway, and markets are treating December as some kind of final curtain call.

Kevin Hassett, a crypto-linked advisor, is leading Trump's economic team, and suddenly we're supposed to believe that crypto regulation will be friendlier and monetary policy will bend toward digital assets. Maybe. But we're also living in a world where the Fed's next meeting isn't until late January—after Trump is inaugurated—and Powell has basically said he's going to sit and wait before making any more moves. That's not dovish. That's cautious, which is sometimes worse because it means nobody knows what's coming next.

Tariffs, mass deportations, tax cuts—all the Trump administration proposals carry inflationary implications that Powell can't price into his December decision without looking prescient. So he didn't. He cut, signaled a pause, and essentially punted the decision to January 29 when market and policy uncertainty will be even thicker.

The S&P 500 had its fifth consecutive down day, the Nasdaq closed out November with losses, and the market's starting to price in a much more "data-dependent" Fed going forward. Translation: no more easy cuts. The rate-cutting cycle that everyone was psychologically preparing for nine months ago? It's been quietly suffocated in its crib.

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Bitcoin around $91K, stocks down on good news, the Fed saying "probably just two cuts next year," and crypto founders suddenly advising the president—this is the environment we're heading into December with. No euphoria. No panic. Just a lot of people holding their positions, looking nervous, and wondering if someone else knows something they don't.

That's markets in their most honest form: the uncertainty premium, baked in and compounding.