The US December Federal Reserve data is out—1-year inflation expectations jumped from 3.20% to 3.4%. The number may seem small, but the actual impact is significant.

Think about it, as inflation expectations rise, the Federal Reserve has less reason to cut interest rates. Some people had hoped for continued easing this month, but now that hope has been dampened. The market's predicted probability of rate cuts will likely be revised downward again.

This is generally bad news for the crypto market. Why? Because crypto assets have always thrived on liquidity. Less rate cuts mean less liquidity, and risk assets will naturally come under pressure. Bitcoin, in particular, still faces short-term pressure.

However, the long-term outlook depends on the overall stance of the Federal Reserve. One or two months of data fluctuations won't change the big picture. The key is to watch inflation trends over the coming months and how the Fed Chair comments.