Prediction Markets Signal 87% Odds for December Rate Cut as Crypto Markets Eye Year-End Rally

Rate-Cut Expectations Drive Market Optimism

Prediction markets are signaling renewed confidence in a December Federal Reserve rate cut, with Polymarket odds climbing to 87% as cryptocurrency-related stocks and broader markets show signs of strength^[1]. The shift in sentiment comes after significant volatility in rate-cut expectations throughout November.

On October 29, Fed Chair Jerome Powell stated that a December cut was "not a foregone conclusion," remarks investors interpreted as hawkish. This caused Polymarket odds to plummet from 89% to as low as 22% by November 20^[1]. However, sentiment reversed dramatically following comments from Fed Governor Christopher Waller on November 17, who argued that "the labor market is still weak and near stall speed" and that inflation is now "relatively close" to the Fed's 2% target^[1].

Prediction Markets Expand Influence

The growing importance of prediction markets in gauging economic sentiment coincides with their rapid expansion. Polymarket recently signed a multi-year agreement on November 13 with TKO Group Holdings to serve as the official prediction-market partner for the Ultimate Fighting Championships and Zuffa Boxing, shortly after partnering with North American fantasy sports operator PrizePicks^[1].

Meanwhile, competitor Kalshi raised $1 billion from Sequoia Capital and CapitalG in November, pushing its valuation to $11 billion, according to a TechCrunch report. This followed a $300 million fundraising round in October^[1]. On November 19, rumors emerged that Coinbase is developing its own prediction-market platform, potentially backed by Kalshi^[1].

ARK Invest Maintains Bitcoin Bullish Outlook

Investment management firm ARK Invest, led by Cathie Wood, continues to stand by its $1.5 million Bitcoin price target despite recent market volatility^[2]. The firm points to improving liquidity conditions as a key catalyst for potential market gains.

According to ARK Invest, approximately $70 billion has already returned to markets since the end of the US government shutdown, with another $300 billion expected to flow back over the next five to six weeks as the Treasury General Account normalizes^[2].

Another significant catalyst on the horizon is the scheduled end of the Federal Reserve's quantitative tightening program on December 1. The central bank is expected to pivot toward quantitative easing, a monetary policy shift that involves bond-buying to lower borrowing costs and stimulate economic activity^[2].

Global Regulatory Developments

Beyond monetary policy and market predictions, the cryptocurrency industry is seeing regulatory progress in major markets. The UK has proposed a new tax framework aimed at easing the burden on decentralized finance (DeFi) users. The proposal would defer capital gains taxes on crypto lending and liquidity pool users until the underlying token is sold, a move welcomed by the local industry^[2].

In the DeFi investment space, crypto market maker and Web3 investment firm DWF Labs announced a $75 million fund dedicated to decentralized finance projects that could support institutional adoption^[2].

As markets head into year-end, the combination of potentially supportive monetary policy, improving liquidity conditions, and expanding prediction market infrastructure suggests a dynamic period ahead for both traditional and cryptocurrency markets. The convergence of these factors will likely play a crucial role in determining market direction through the final weeks of the year.