Key insights:
Bitcoin is struggling to remain above $115,000 following a 25-bps interest rate cut by the Fed.
The Fed indicated an additional 50 bps of cuts will occur through 2025.
While Bitcoin futures open interest increased, spot volumes continued to decline.
Bitcoin (BTC) is currently attempting to maintain its price above $115,000 after the U.S. Federal Reserve announced a 25-basis point interest rate cut, bringing the benchmark range down to 4.0%–4.25%. The immediate reaction in the crypto market has been subdued, as traders process the cautious messaging from the central bank. BTC’s price briefly fell below $115,000, and it is now working to close above that level on the hourly chart.
The Federal Open Market Committee (FOMC) statement released on Wednesday indicates that job growth has slowed, unemployment has slightly increased, and inflation remains elevated. Importantly, the Fed recognized a rise in downside risks to employment, suggesting a more dovish policy stance.
New forecasts exhibit an expectation for an additional 50 basis points of cuts through 2025, reflecting the Fed’s escalating concerns about risk balance. While the FOMC reiterated its commitment to the 2% inflation goal, it has leaned towards fostering growth and employment amidst slowing economic momentum.
A dissenting opinion came from newly appointed Fed Governor Stephen Miran, who advocated for a more significant half-point cut, reinforcing the belief that the central bank is preparing for a more accommodative approach ahead.
Despite these dovish signals, Bitcoin’s response has been tepid, with price consolidation dominating over strong movement. Traders seem cautious, balancing the Fed’s long-term easing trajectory against ongoing uncertainties in inflation dynamics and global markets.
Related: Expectations for the Federal Reserve’s rate cut and its potential effects on crypto
What’s on the horizon for Bitcoin in the short term?
Earlier reports from Cointelegraph indicated that market analyst Nic Puckrin sees the risk of the Fed’s rate cut already factored into market prices, increasing the likelihood of a short-term “sell the news” reaction. While lower borrowing costs typically benefit risk assets over time, traders caution that initial optimism may dissipate swiftly.
This implies that Bitcoin and the wider crypto markets could encounter short-term volatility, even as the long-term outlook remains favorable under continued easing cycles.
Following the FOMC announcement, Bitcoin open interest surged, indicating that futures traders are preparing for increased volatility. However, activity in the spot market tells a contrasting story, with total spot volumes continuing to decline despite rising futures volumes.
This divergence suggests that the present price movement is largely driven by leveraged positions rather than authentic spot demand. Without a stronger influx of spot buyers, the sustainability of these price changes remains uncertain, making the market susceptible to sharp fluctuations if leveraged positions are unwound.
Related: Price forecasts 9/17: BTC, ETH, XRP, BNB, SOL, DOGE, ADA, HYPE, LINK, SUI
This article does not provide investment advice or recommendations. All investments and trading activities involve risk, and readers should carry out their own research before making decisions.
