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In summary
- Bitcoin (BTC) is holding steady around $60,000, showing resilience, just hours before the Federal Reserve is set to announce its interest rate decision.
- The leading Cryptocurrency is trading 2.5% higher during European trading hours on Wednesday, while Ethereum (ETH) is up 0.5%, trading at $2,320.
- The Fed is widely expected to announce a cut of 25 to 50 basis points, with CME’s FedWatch tool suggesting a 61% chance of a reduction greater than 50 basis points.
Bitcoin (BTC) is holding steady around $60,000, showing resilience, just hours before the Federal Reserve is set to announce its interest rate decision.
The leading cryptocurrency is trading 2.5% higher during European trading hours on Wednesday, while Ethereum (ETH), the second-largest cryptocurrency by market cap, is up 0.5%, trading at $2,320.
While Bitcoin and Ethereum are showing gains, the broader cryptocurrency market remains mostly stable with altcoins such as Solana (SOL) down 1%, (XRP) down 1.6%, (BNB) up 0.8%, Dogecoin (DOGE) up 0.6%, and (TON) up 0.2% exhibiting mixed performances, indicating nervousness in the market ahead of the Fed’s decision, which could send ripple effects across both traditional and digital asset markets.
The Fed is widely expected to announce a cut of 25 to 50 basis points (bps), with CME’s FedWatch tool suggesting a 61% chance of a reduction greater than 50 bps.
While a reduction in interest rates generally strengthens risk assets like Bitcoin, the focus will be on the Fed’s future guidance, according to Illia Otychenko, Principal Analyst at CEX.IO.
In a note sent to Decrypt, Otychenko said that even if the Fed opts for a 50 basis point cut, the market reaction could depend on comments from Federal Reserve Chair Jerome Powell on future monetary policy actions.
“Without clear guidance going forward, institutional investors may reduce their risk exposure, which could dampen Bitcoin’s bullish momentum,” Otychenko said.
However, in the long term, Bitcoin continues to signal upside potential, with the Puell Multiple, a key market metric, falling below 0.5. Historically, this has been a buy signal, indicating a potential market bottom.
The Puell Multiple is an indicator that compares daily Bitcoin issuance (in USD) to its 365-day moving average, helping to identify potential market tops and bottoms based on miner profitability.
Institutional flows into Bitcoin-related investment products have shown significant interest ahead of the Fed’s decision.
On September 17, Bitcoin ETFs saw a net inflow of $187 million, marking four consecutive days of positive flows. Fidelity’s ETF (FBTC) alone accounted for $56.61 million, while Bitwise’s ETF (BITB) received flows of $45.35 million, underscoring the growing institutional appetite for Bitcoin in the face of looming macroeconomic uncertainties.
In contrast, Ethereum-related investment products saw net outflows on the same day, with Grayscale’s Ethereum Trust (ETHE) experiencing a significant outflow of $17.88 million, seemingly suggesting that investors are prioritizing Bitcoin as a safer bet amid market volatility.
Kris Haralampiev, Structured Products Lead at Nexo, told Decrypt that lower interest rates typically increase liquidity in the market, which often pushes investors towards riskier assets like cryptocurrencies. Bitcoin has historically benefited from rate cuts, as seen during the COVID-19 pandemic when accommodative monetary policies fueled a strong rally in the cryptocurrency market.
“Bitcoin thrives when liquidity is abundant,” Haralampiev said, adding that the medium- to long-term outlook for Bitcoin remains bullish, especially if the Federal Reserve continues to ease monetary conditions. However, short-term volatility is expected, especially if the Fed rate cut surprises market participants with a more hawkish stance or if recessionary concerns deepen.
Edited by Stacy Elliott.
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