Fed’s First Rate Cut in 4 Years: What This Fed Meeting Means for Bitcoin Price

Bitcoin price trades just below the $60,000 psychological level today as financial markets anticipate the US Federal Reserve meeting involving decisions regarding interest rate cuts and the FOMC (Federal Open Market Committee) meeting today at 2:00 pm ET.

Fed Meeting Outcome and its Impact on Bitcoin Price?

The FOMC meeting that began on September 17 will decide whether to ease or tighten the interest rates. The US Federal Reserve, on September 18, will make a decision regarding the target interest rates that have been hovering in the 500 to 525 range for the past four years. According to CME’s FedWatch Tool, there is a 100% chance of a rate cut from the Fed chair Jerome Powell.

The interest rate decision is key since it hints at what investors will do next. A lower interest rate will induce borrowing and spending to stimulate the economy. Such a decision will cause risk-on assets like stock markets and cryptocurrencies to shoot higher.

Since Bitcoin (BTC) belongs to the risk-on category, investors can expect rate cuts to propel BTC higher. However, the dynamics are not as simple. If the decision from the Fed deviates wildly from the market expectations it could cause an opposite reaction. Investors typically avoid trading on these days due to heightened volatility. 

Will Fed Rate Cut Be a 25bps or 50bps?

The outcome of today’s Federal Reserve meeting involving the rate cut decision will end up in either a 50 or 25 basis point reduction. 

1. With 37% odds of a 25 bps rate cut, the target rate would go down from 525 to 550 to 500 to 525 range.
2. A 50 bps rate cut is likely with 63% odds and would knock the interest rate down to 475 to 500 range.

Although some members of the FOMC suggested a 75 bps rate cut, it is unlikely as of now.

Bitcoin Price Forecast: Whales Sell Nearly $1.2 Billion BTC

Bitcoin whales holding between 1,000 to 10,000 BTC have reduced their stack by 20,000 BTC. In less than 24 hours, these cohorts of investors have offloaded nearly $1.19 billion worth of the largest cryptocurrency by market. This behavior is concerning, especially ahead of the Fed rate cut meeting, which is supposed to be a bullish event.

While theoretically, this FOMC meeting is bullish, it is unlikely that market participants are expecting risk-on assets to rally. Many traders are also preparing for the opposite, a sell-the-news event.

JCharts posted his outlook on X (formerly Twitter), suggesting that Bitcoin price could retest $61,000, followed by a correction to $57,400. 

On the other hand, QCP Capital posted its long-term bullish outlook in a recent Telegram post. 

“The start of a rate cutting cycle aimed at normalizing interest rates supports hard assets as stores of value. While drawdowns and high volatility are expected, don’t let that distract you from the path to higher BTC prices. We favor long-dated structures with unlimited upside to capitalize on potential parabolic advances in prices.”

This bullish outlook can be seen in the S&P 500, which trades around 36.24 points lower from its all-time high of $5670.81. Many believe the Fed meeting could propel the S&P 500 to a new ATH. 

Due to Bitcoin’s high correlation with the stock market, the ripple effects could serve as a tailwind. In such a case, Bitcoin price prediction hints at a retest of the next key hurdles at $65,000 & $70,000.

Regardless of 25 bps or 50 bps, investors can count on volatility in the crypto markets and massive liquidations as a result of leverage trading.