The Fed's forecast for Q1 2026 presents the crypto market with key scenarios: if rate cuts pause and inflationary pressure remains, Bitcoin could fall to $70,000 and Ethereum to $2,400. At the same time, the Fed has ended quantitative tightening and initiated measures to support bank reserves, adding another factor influencing prices.
Potential BTC and ETH Price Drops if Fed Pauses Rate Cuts
Some forecasts suggest that a pause in rate cuts in Q1 2026 amid persistent inflation could increase pressure on risk assets, including BTC and ETH. Jeff May, COO of the BTSE exchange, estimates that in this scenario BTC could fall to $70,000 and ETH to $2,400.
Fed leadership also highlights elevated inflation risks and data dependence, making future policy more contingent on macroeconomic indicators rather than predetermined steps. Additionally, the November Consumer Price Index stood at 2.63%, increasing the likelihood of discussions about the future path of rates.
Fed Policy Impact on Crypto Markets in 2025
In 2025, the Federal Reserve cut interest rates three times, mainly in the last quarter, amid rising unemployment and signs of cooling inflation. However, the crypto market reacted counterintuitively: instead of a confident rally, there was selling pressure and a significant drop in market capitalization.
This dynamic shows that simple rate cuts do not always lead to crypto growth — overall liquidity and market participants' expectations are crucial. For a detailed explanation of previous price drops, see the article on why Bitcoin is falling.
The Role of "Hidden QE" in Stabilizing Crypto Prices
The Fed formally ended quantitative tightening and, starting December 1, shifted to fully rolling over maturing Treasury and mortgage-backed securities to halt further reserve reductions. Concurrently, it launched Reserve Management Purchases (RMPs)—buying short-term Treasury bills worth about $40 billion to stabilize bank reserves and ease stress in the money market.
Some analysts call this approach "hidden QE" because, although smaller in scale, it still injects liquidity into the system. If RMPs continue at a slower pace in Q1 2026, they could quietly support risk appetite and price levels in crypto assets without overt rate changes.
Expert Forecasts and Opinions
Several Fed officials, including New York Fed President John Williams, emphasize inflation risks and data dependence, offering no clear signals on further tightening or easing. This caution explains why markets do not always respond as expected to rate cuts.
Jeff May also notes an alternative scenario: with ongoing ETF inflows exceeding $50 billion and institutional accumulation, Bitcoin could theoretically rise to the $92,000–$98,000 range. The influence of large investors and institutional factors continues to play a significant role in shaping market trends — more on this in the article about institutional factors.
Why This Matters
If you mine with 1 to 1,000 devices and live in Russia, dramatic Fed moves don’t directly change your electricity bills but affect cryptocurrency prices and thus mining profitability. A pause in rate cuts combined with persistent inflation could pressure BTC and ETH prices, reducing revenue all else equal.
At the same time, reserve support measures (RMPs) act as a mitigating factor: they add liquidity and can limit sharp sell-offs, partially protecting miners’ revenue from the steepest drops. Therefore, it’s important to monitor not only rate decisions but also liquidity signals in the market.
What to Do?
Practical steps for miners with small to medium-sized rigs are straightforward and immediately applicable. They help reduce risks related to volatility and liquidity changes.
- Review cash flow: assess how many days you can operate during price drops and, if needed, build a reserve for electricity payments.
- Optimize energy consumption and equipment efficiency: update miner settings and explore reducing power usage without significant hash rate loss.
- Diversify fiat conversion: during high volatility, partially lock in revenue to cover fixed costs.
- Monitor market liquidity and Fed news: decisions on pausing rate cuts and RMP programs directly affect overall supply and demand.
Brief on Risks
Remember that all scenarios depend on macro data and central bank decisions: if inflation persists and rate cuts pause, price pressure is possible, but reserve support measures may partially smooth the impact. Act cautiously and have a plan for strong volatility.