Bitcoin Price Faces FOMC Volatility as Historical Trends Show Significant Sell-Offs

Bitcoin price

The Bitcoin price is experiencing increasing pressure as it approaches the Federal Open Market Committee (FOMC) meeting on Wednesday. Historically, these meetings have coincided with major price swings in the leading cryptocurrency.

Anticipated Interest Rate Decision

The Federal Reserve (Fed) is largely expected to keep interest rates steady during this meeting. Economists surveyed by FactSet predict the federal funds rate, the benchmark rate utilized by banks for overnight lending, will remain within the 3.5% to 3.75% range.

This decision comes after three consecutive rate cuts made by the Fed late last year, which initially sparked optimism in various risk assets, including Bitcoin. However, despite this initial upward momentum, Bitcoin has had difficulty maintaining its price. Currently, the cryptocurrency is trading around $87,780, approximately 30% lower than the all-time highs it achieved last year.

Bitcoin price The one-day chart shows Bitcoin's struggle to consolidate above the important $87,000 level. Source: BTCUSDT on TradingView.com

Market analyst Ali Martinez advises caution, referencing Bitcoin’s past behavior surrounding FOMC meetings. In a recent update on X (formerly Twitter), he noted that the likelihood of a rate cut in January is very low, at just 2.8%. This suggests that there may not be any significant changes in monetary policy in the short term.

According to Martinez, this scenario often leads to heightened volatility for Bitcoin rather than sustained upward movement. Looking back to 2025, he found that Bitcoin typically reacted negatively after most FOMC policy meetings. Out of the eight FOMC decisions that year, seven were followed by significant declines in Bitcoin's price. For instance, after the January meeting, Bitcoin declined by 27%, with similar downward trends following meetings in March (14%), June (8%), July (6%), September (7%), October (29%), and December (9%). The only exception was in May when Bitcoin briefly surged by about 15% post-decision.

Key Decision Point for Bitcoin Price

From a technical and on-chain analysis standpoint, analyst BitBull sees Bitcoin approaching a crucial moment. BitBull pointed out on social media that Bitcoin is now situated within what she deems a key on-chain decision zone.

Currently, Bitcoin is trading closely to the Active Investor Mean, estimated at around $87,500. This level indicates the average cost at which active investors have purchased Bitcoin, suggesting that many are at a breakeven point.

BitBull explained that pressure is building on either side of the price. Above the current level, the short-term holder cost basis is approximately $96,500, indicating that many recent buyers are facing losses.

Bitcoin price Key price points for Bitcoin. Source: BitBull on X

Consequently, any upward momentum toward this zone could encounter selling pressure as traders seek to exit at minimal losses. On the downside, the True Market Mean, around $80,700, has historically defined the line between routine corrections and more serious structural weakness.

Further down, the realized price near $56,000 indicates that long-term holders are primarily unaffected by recent price fluctuations and remain in profit.

BitBull argues that if Bitcoin can maintain its support above the $87,500 level, it would imply that active capital is still backing its position and that the overall market strength remains intact. Conversely, a sustained drop below this level could lead to a potential decline toward $80,700.

Key Takeaways:

The Bitcoin price is under pressure before the FOMC meeting, historically linked to major price movements.
The Fed is likely to keep interest rates steady, impacting market sentiment on risk assets.
Bitcoin has struggled to maintain its value, currently trading around $87,780, significantly lower than previous highs.
Historical data indicate that most FOMC meetings in 2025 resulted in notable declines in Bitcoin's price.
Bitcoin is at a key decision point; maintaining the $87,500 support level could indicate resilience, while a drop below may lead to further declines.

Image credit: Featured image from OpenArt, chart from TradingView.com.