Bitcoin is facing challenges maintaining the $115,000 milestone despite the Federal Reserve’s recent decision to lower interest rates by 25 basis points.
Key insights:
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The Federal Reserve reduced interest rates by 0.25%, aiming to support economic growth.
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Additional reductions totaling 50 basis points are projected through 2025.
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Bitcoin futures show increased open interest, whereas spot trading volumes continue to fall.
After the Fed’s policy shift pushing interest rates to a 4.0%-4.25% range, Bitcoin’s price softened slightly below $115,000 but is striving to rebound and close above this important price level.
The Federal Open Market Committee highlighted a slowdown in job growth and a slight rise in unemployment, indicating inflation remains elevated. This cautious approach has redirected the policy stance towards easing.
Market forecasts suggest more rate cuts are possible, signaling concerns over economic risks. The Fed keeps its commitment to a 2% inflation goal while showing increased support for employment and growth.
A dissenting Fed governor called for a larger 0.5% rate cut, hinting at an even more accommodative monetary policy on the horizon.
Despite the Fed’s dovish tone, Bitcoin’s price action has been subdued, marked by consolidation rather than strong upward momentum. Traders remain cautious amid uncertainties in inflation and global economic factors.
Short-Term Outlook for Bitcoin
Market analyst Nic Puckrin suggests the Fed’s rate cut may already be accounted for, raising the possibility of a short-term sell-off as investors react to the news.
While lower borrowing costs generally benefit risk assets, initial enthusiasm could quickly wane, leading to volatility in Bitcoin and the broader cryptocurrency market.
Post-announcement, Bitcoin futures open interest jumped sharply, signaling traders expect increased volatility. Conversely, spot market volumes are declining, reflecting reduced immediate buying interest.
This gap between futures and spot trading suggests the current price movement is heavily influenced by leveraged positions rather than genuine demand, making the market susceptible to swift reversals if these positions unwind.
Traders and investors should stay alert to these dynamics as Bitcoin navigates its path following the Fed’s interest rate adjustment.
This article does not constitute financial advice. Always conduct your own research before making investment decisions.
