Fed rate cuts a turning point… Will individual crypto investors return in 2026?

The U.S. Federal Reserve (Fed)'s tilt toward rate cuts in 2026 has been identified as a key variable that could determine whether individual investors return to the crypto asset market. Analysts say that if rate cuts continue, risk-on sentiment could recover and funds could flow back into the crypto market.

According to a report by Cointelegraph on the 31st (local time), Owen Lau, Managing Director of Clear Street, said in a CNBC interview, "The Fed's rate decisions are one of the most important catalysts for the crypto market in 2026," adding, "If rate cuts continue, both individual and institutional investors will show greater interest in the crypto market."

Generally, rate cuts reduce the appeal of traditional assets such as bonds or deposits, prompting investors to move to risk assets that offer the potential for higher returns. In this process, crypto assets including Bitcoin (BTC) have emerged as alternative investment destinations.

The minutes of the December Federal Open Market Committee (FOMC) released by the Fed also mentioned the possibility of monetary policy adjustments next year. The minutes contained the phrase, "The committee stands ready to appropriately adjust the stance of monetary policy should risks arise that could impede achievement of its objectives."

However, the market still questions the likelihood of aggressive rate cuts from the start of the year. According to crypto prediction platform Polymarket, the chance of a rate cut in January was only 15%, while the chance of a March cut was relatively higher at 52%.

The Fed cut its policy rate three times in 2025 alone. The first cut was a 25-basis-point reduction carried out in September. Afterwards, on October 5, Bitcoin's price surged to 125,100 dollars, marking an all-time high. But on October 10 a massive liquidation event led to the unwinding of leveraged positions worth about 19 billion dollars, and the upward momentum did not last long.

Additional 25-basis-point cuts were implemented in October and December, but internal Fed views diverged over the December cut. Bitcoin is currently trading at 88,439 dollars, about 29.3% below the October high.

Against this backdrop, investor sentiment across the crypto market remains muted. The Crypto Fear & Greed Index has stayed in the 'extreme fear' zone since December 13, and as of the 31st the index stood at 23. Market observers say the Fed's 2026 rate policy direction could be the turning point for restoring individual investor sentiment.