As the Fed’s decision approaches, Bitcoin appears poised for a potential rally if traders’ predictions hold true. Currently, the asset is climbing close to the $118,000 threshold. Will it push any further?
Summary
- The Fed is anticipated to reduce interest rates by 0.25%, setting the stage for a much-expected rally in alternative assets.
- Bitcoin has surged over 5% in recent days as it continues to rise ahead of the Fed decision.
Bitcoin enthusiasts and market participants are wagering that the Federal Reserve will lower interest rates by a quarter-point, or a 25 basis point reduction from the current target range of 4.25% to 4.5%. This shift in monetary policy could lead to a weakening dollar, allowing alternative assets to gain traction in a rally.
According to Reuters, the dollar has dropped to a four-year low, just one day before the Federal Reserve’s interest rate cut announcement scheduled for September 17 at 2 PM local time.
A weakening dollar typically benefits riskier assets viewed as a hedge against inflation, such as gold and cryptocurrencies. Bitcoin, in particular, has been on an upward trajectory leading up to the Fed’s decision.
The cryptocurrency market has been anticipating a Fed rate cut since the beginning of the week, with Bitcoin (BTC) climbing by over 5% in the past week. Even just before the announcement, the overall crypto market cap exceeded the $4 trillion psychological barrier, currently standing at $4.16 trillion as liquidity flows into the sector.
Recently, BitMine Chairman Tom Lee predicted that both Bitcoin and Ethereum could experience a “monster move” that would propel prices to new highs if the Fed proceeds with its expected rate cut. The analyst forecasts a three-month rally for BTC following the Fed’s rate cut excitement.
How is Bitcoin performing ahead of the Fed decision?
At the time of reporting, Bitcoin is trading at $117,319, up by 1.23%. The asset is showing resilience as traders wait for the Federal Reserve’s much-anticipated rate decision. BTC has bounced back from the $116,200 to $116,300 support zone, making a strong move past $117,200, indicating aggressive buying ahead of the announcement.
The timing suggests heightened speculation that the Fed may execute a 25 basis point cut, fueling optimism among traders. This “buy the rumor” behavior has historically driven Bitcoin prices up leading into dovish monetary policy announcements. A similar trend was observed in December 2024 when the Fed cut interest rates by 25 basis points, triggering a rush in the crypto market.
With the Relative Strength Index (RSI) at 71.99, it indicates that Bitcoin has briefly entered overbought territory, reflecting robust bullish sentiment. However, this indicator has cooled slightly, suggesting potential short-term consolidation.
Nevertheless, the RSI trend still supports upward momentum, indicating that buyers are firmly in control of the market. If the Fed confirms a 25 basis point cut, Bitcoin could soar even higher as traders anticipate more favorable liquidity conditions.
If the Fed signals a more aggressive easing approach, BTC may retest higher resistance levels, possibly exceeding $118,000, while a more hawkish stance could drive it back toward the $116,500 to $116,700 range.
