With the year so far showing so much promise, Bitcoin bulls were probably expecting a Santa Claus Rally for the record books. After spending most of 2025 above the $100,000 mark, Bitcoin recorded an all-time high of $126,270 in October before beginning a major retracement. BTC has now declined almost 30% from this recent high, and it looks as if even some of the most optimistic crypto evangelists are beginning to worry that we could be at the end of one of the lengthiest bull markets we've seen since the start of the digital currency era.
Despite soaring interest and prices in the gold market, the latest commodities surge has demonstrated that Bitcoin is not quite in the same store-of-value camp as the yellow metal. Perhaps overly sensitive to central bank policy considerations and liquidity concerns, BTC has failed to turn this year's sticky inflation into gains quite like gold has. As with much in the world of investment, Federal Reserve policy will surely guide the future travel of crypto, but unique factors like dollar debasement and demand for alternative hedges could help lead BTC into 2026 and beyond.
Power of policy
Bitcoin (BTC/USD) jumped slightly to hover in and around $94,000 on 10 December, but the hopes of a year-end crypto rally were dashed somewhat by the Federal Reserve's two-day policy meeting and post-decision commentary. Despite delivering a 25 basis-point rate reduction on 11 December to put rates in the range between 3.50% and 3.75%, Fed Chair Jerome Powell's post-meeting remarks have been interpreted to denote a likely pause in dovish policy in January as policymakers try to balance containing inflation with a cooler labour market. The Federal Open Market Committee (FOMC) vote was split 9-3, with one official calling for a 50-basis-point cut and two others requesting no cuts at all. The latest information suggests policymakers will make only one 0.25 rate cut in 2026 and another in 2027, though this could, of course, change if inflation is brought under control in 2026. As Powell put it: "There is no risk-free path for policy as we navigate this tension between our employment and inflation goals," which would suggest that the regulator is extending its "wait-and-see" approach.
However, there's no guarantee that this stance will remain since Powell's mandate ends in May 2026. Coin Bureau investment analyst and co-founder Nic Puckrin expects President Trump to announce Kevin Hassett, who is viewed as an industry-friendly choice, as his candidate to replace Powell. "With ultra-dovish Kevin Hassett looking like the frontrunner to replace Powell next year, markets could very quickly switch from depression to euphoria in 2026," Puckrin said. There's no guarantee where rates will be headed, but it's clear from the 3.5% decline in BTC/USD noted since the regulator decided on a modest cut and tempered rhetoric that crypto will need more aggressive monetary policy action if it is to make another leg up.
Debasement drive
We've all been vaguely aware of the US dollar's gradually declining power over recent years, but now dollar debasement is suddenly one of the world's most searched economic terms. As Google searches hit an all-time high, gold and silver prices are soaring in the same direction. BRICS nations are pushing for a gold-anchored digital unit, while the US money supply is bloating in traditional fiat fashion, particularly with Powell's recent hints at active quantitative easing in the new year. And yet, the big question on the crypto community's lips is simple: If dollar debasement is accelerating, why isn't Bitcoin flying ever higher? Indeed, the Dollar Index (DXY) has also shown a relative decrease against other major currencies and has lost 10% of its objective value since the start of the year. In theory, dollar debasement should lead to higher BTC prices since Bitcoin is considered a haven asset with no inflationary mechanism.
However, in reality, BTC has lost 7% since the beginning of the year and 27% from its ATH. This is because, up to now, central banks have been hedging their fiat with more tried and true precious metals, but this could begin to shift in 2026. The US has already created a National Strategic Bitcoin reserve, while the Czech Republic and Taiwan are also looking at reducing their dollar dependence by purchasing Bitcoin alongside gold. As time goes on, we're likely to see Bitcoin become an increasingly attractive option for reserve building on account of its greater liquidity and ease of transfer, particularly with the availability of spot ETFs from January of last year. What we also have to remember is that Bitcoin's price action is inherently more complicated than gold, given its status as a speculative asset in addition to a potential store of value. It could be that the sustained growth from regular acquisitions from both central governments and investment funds will take some time to be reflected in the market price at times of high volatility such as now.
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