In December, US mortgage applications from the MBA rose by 4.8%, recovering from a previous decline of 1.4%. This increase coincides with the Federal Reserve’s expected announcement of a 25 basis point interest rate cut for 2025 on Wednesday. Bitcoin is currently holding steady above $92,000, boosted by ETF inflows and the anticipation of a Fed rate reduction. Ethereum has moved past the 50-day EMA, showing signs of a bullish trend, while XRP is under pressure, with sellers targeting the $2.00 support level.

Hyperliquid Trading Update

Hyperliquid is trading at over $28.00 after bouncing back from a support level of $27.50. The cryptocurrency market is seeing some losses today as the Federal Reserve prepares to announce its monetary policy. Gold prices have dipped slightly despite a weakening US Dollar and US Treasury yields partially reversing recent gains. Gold investors are staying cautious ahead of the expected 25 basis point cut and upcoming updates on the Fed’s “dots plot.” There is increasing disagreement among Federal Reserve officials regarding the anticipated interest rate cut. We are closely monitoring the Fed’s decision today since the market has nearly fully priced in a 0.25% interest rate cut. The strong 4.8% rise in mortgage applications from December 5th indicates that the housing market is responding positively, confirming that lower rates are having the desired effect on the economy.

Market Reactions and Projections

Recent data strengthens the case for this final cut of 2025, especially since November’s CPI report showed core inflation dropping to 2.9% year-over-year, the lowest in over two years. This gives Fed officials the backing they need to ease policy further. We see this as a green light for the expected cut, but real market impact will come from future guidance. For equity index traders, the main focus will be on the updated “dot plot” revealing officials’ rate projections for 2026. A dovish signal indicating a continued pause or more cuts could lead to a market rally, making call options on the S&P 500 appealing. Conversely, any sign of a hawkish approach would pose significant downside risks. We remember how the Fed’s shift to easier policy in late 2018 triggered a significant market rally throughout 2019. This historical context suggests that a dovish stance today could create a positive atmosphere for risk assets as we approach the new year. Traders should be prepared for a sustained market move, not just a one-day spike. With another rate cut expected, we anticipate continued weakness in the US Dollar, which has already dropped by 2% in the last month. This situation is generally favorable for gold, prompting us to consider call options on gold ETFs. The metal remains cautious, but it could rise if the Fed’s statement is more dovish than expected. In the cryptocurrency arena, implied volatility in Bitcoin and Ethereum options is high, indicating market anticipation. Although ETF inflows have kept Bitcoin above $92,000, the overall market softness suggests that traders are apprehensive. We’re positioned for a potential rally but mindful of a “sell the news” scenario if the Fed’s guidance falls short of expectations. The noted disagreements among Fed officials contribute significantly to uncertainty, keeping options premiums elevated. This suggests that implied volatility could drop sharply right after the announcement, a phenomenon known as “vol crush.” For traders who believe the market’s reaction will be mild, selling options premium may be a smart strategy. Create your live VT Markets account and start trading now.

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