by Enoch Mwathwa
Bitcoin recently surged above $115,000 as traders grew confident that the Federal Reserve would begin cutting interest rates. Although this has been a source of optimism in all the crypto markets, analysts caution that the rally might encounter obstacles. The move made by the Fed may define the next major shift in the history of Bitcoin, as the alternative pace might either give Bitcoin a new wave or result in a correction.
Fed Rate Cuts and Bitcoin’s Bullish Setup
The Federal Open Market Committee (FOMC) is sitting this week, and it is almost guaranteed that they will reduce the rates. Kalshi and Polymarket odds give a 100% possibility of a cut of at least 25 basis points. This can also be verified by the CME FedWatch Tool. Bitcoin has historically performed well whenever the Fed loosens its monetary policy because liquidity is invested in risk assets.
Bitcoin has been roaring to the top of the market during the pandemic because the Fed reduced rates and unleashed stimulus. Nevertheless, the reverse worked in 2022 when the Fed aggressively increased the rates, which took Bitcoin below 16,000. The cycle puts into focus the fact that the performance of Bitcoin is closely connected to the monetary policy.
Timing is another positive reason. The cut arrives in the fourth quarter, which is historically Bitcoin’s strongest period. CoinGlass data shows an average Q4 return of more than 84% since 2013. Combined with over $2.3 billion in ETF inflows last week, the backdrop supports strong upside.
Still, the market may have already priced in the rate cut. If the Fed delivers a “hawkish cut” by signaling limited easing ahead, traders could use the event to take profits. That would turn the bullish setup into a sell-the-news scenario.
Technical Risks Threaten Bitcoin’s Rally
Nevertheless, the chart of Bitcoin is raising a red flag. The weekly time frame has drawn an upward wedge-shaped price. This pattern, which is characterized by convergent upward trend lines, is frequently an indicator of the imminent breakdown.
To increase the risk, technical indicators indicate bearish divergences. The Relative Strength Index (RSI) is also declining, as well as the MACD, and Bitcoin is on the rise. These divergences indicate that the buying momentum is wearing out, and the correction can come next.
As of the moment, the price of Bitcoin is around $115,000 according to the CoinMarketCap data. As long as the Fed is able to confirm a dovish stance and liquidity persists, the rally might continue. But in case the profit-taking is hastened, Bitcoin can retreat abruptly from its present positions. The traders are closely followed because the choice made by the Fed may determine the path of Bitcoin in the remaining part of the year.
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