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The week’s main event, the FOMC’s final meeting of the year, saw policymakers deliver a 25bps rate cut – an outcome largely expected by markets. Chair Powell delivered a moderately hawkish press conference, leaving the door both open to a rate cut or a pause in the January 2026 meeting. The outcome for crypto markets? Certainly no “firework” reactions. Open interest in perpetual swap contracts has mostly been sideways for the entire week, implied volatility in options markets had steadily fallen lower even ahead of the meeting and perpetual swap funding rates for BTC showed a lack of participation for leveraged position taking. Even after the Fed delivered its third cut of the year and provided a more optimistic outlook on the US economy via the Summary of Economic Projections, volatility smiles in options markets continue to point bearishly – skewed towards OTM puts.
Block Scholes’ Risk Appetite Index measures the level of euphoria (above 1) or panic (below -1) in the spot market. Momentum in this index shows a strong relationship to spot returns.
The FOMC’s final meeting of the year saw policymakers cut interest rates for the third time in 2025, in line with market expectations. On the whole, Chair Powell delivered a moderately hawkish press conference, keeping both the option of a pause and a cut open for the January meeting.
We see very little firework reactions in leveraged swap contracts open interest and trade volumes both in the days leading up to the meeting, and in its aftermath. Open interest had mainly stayed flat around $8B for most of this week, with a small drop in early Asian trading hours on Dec 11, 2025 as BTC spot price slowly sunk from $94.5K to $90K post Chair Powell’s press conference.
Overall, as we have continued to observe on a weekly basis with BTC’s spot price still 28% below its ATH, traders are not showing much appetite to re-enter leveraged positions, and we see few signs of any major liquidations this week. Both open interest levels and trade volumes are far lower than their peaks pre-Oct 10, 2025.
Options markets are suggesting a tempering of expectations for those hoping for the ‘Santa rally’ that has typically accompanied previous BTC cycles.
The December FOMC’s Summary of Economic Projections suggests that the median FOMC participant sees only one rate cut as appropriate in 2026, though markets (according to CME Fed Funds futures contracts) are still pricing in for two. Chair Powell said in his Q&A that “the effects of the 75bps will only begin to be coming in”, suggesting the cumulative three cuts this year by the Fed will continue to work their way through the economy.
Still, volatility smiles paint a bearish picture across every time horizon: short-tenor smiles for BTC and ETH are skewed towards OTM puts by 4.4% and 4.8% respectively, while longer-dated 90-day options show a 5.3% premium and 5.0% premium towards put contracts, respectively. Ultimately, for now, traders are not seeing enough catalysts to help support the case of a Santa rally.