What to Anticipate for Bitcoin Following the FOMC Meeting

As the U.S. Federal Reserve holds its final meeting of the year on December 9, traders keep a close eye on potential interest rate cuts. While a reduction in rates could stimulate the economy, past reactions show that Bitcoin may not react positively in the immediate aftermath. This article analyzes the implications of the Federal Open Market Committee (FOMC) meeting on Bitcoin's price and what traders should look out for.

Key Takeaways

The Federal Reserve is expected to announce a 25 basis points rate cut.
Previous rate cuts in September and October were followed by Bitcoin price declines.
Market behavior before FOMC announcements often indicates a front-running trend.
Bitcoin's price may need to surpass $94k for bullish momentum, but traders should remain cautious and alert to potential dips.

The Expectations Post-FOMC

The U.S. Federal Reserve's last meeting of 2023 commenced on December 9. According to the CME Group's Fed Watch tool, traders predominantly foresee a 25 basis points (bps) rate cut, giving minimal consideration to a more drastic 50 bps cut. Lower borrowing costs from such cuts are anticipated to support economic growth. The Fed has remained consistent in this approach, having already implemented cuts in both September and October.

Futures trader Ardi noted in a post on X that a rate cut might not immediately result in a bullish trend for Bitcoin (BTC). The previous cuts of 25 bps in September and October led to price drops of 8% and 12%, respectively.

Have Expectations Already Influenced the Market?

The analyst pointed out a recurring pattern due to market expectations. It appears that market participants often start positioning themselves in anticipation of rate cuts before the official announcements. Consequently, significant rallies may have already peaked before the FOMC's statements.

Bitcoin 4-hour Chart Source: BTC/USDT on TradingView

This framing helps clarify the recent upward trend, where Bitcoin surged by 5.7% to reach $94,000 within 12 hours. Nevertheless, the 4-hour chart indicates that Bitcoin has struggled to pass through the supply zone (highlighted in red) that has existed since mid-November. Furthermore, the On-Balance Volume (OBV) has shown a gradual increase in December, though it remains uncertain if this buying momentum is sufficient to drive prices higher.

Positive indications were observed on the H4 chart, with a bullish structural break (marked in orange) detected. If buying pressure holds strong, Bitcoin may succeed in exceeding the $94,000 resistance level. However, historical post-FOMC dips suggest that it might take more time for this breakthrough to materialize.

Bitcoin 1-hour Chart Source: BTC/USDT on TradingView

On the 1-hour chart, bullish pressure remains consistent. The imbalance (white box) extends downward to $90,600.

Understanding the Bullish Bitcoin Outlook

At present, the anticipated bullish reaction appears to be delayed, likely due to the marketplace awaiting critical macroeconomic data. Should Bitcoin surpass $96,000 and subsequently retest the $94,000-$95,000 range as supportive levels, it would present a promising buying opportunity.

Advice for Bitcoin Traders: Stay Neutral or Be Cautious

A bearish scenario seems more probable at this point. The lack of a strong reaction during the retest of the H1 imbalance around $92,500 suggests a potential short-term dip to $90,600, marking the gap's low, could be forthcoming. Traders should be vigilant for movements below $90,600 and $89,900, which could signal a deeper retracement.

Should the price fall, it might reach $88,000, or even $84,000, before a recovery begins. Traders are advised to prepare for either situation and should exercise caution before making trading decisions.

Conclusion

Disclaimer: This information is for informational purposes only and does not represent financial, investment, trading, or other forms of advice; it reflects only the writer’s perspective.