Journalist
Posted:
- Bitcoin hit a new monthly high ahead of the Fed’s decision.
- BTC whales doubled against BTC despite near-term market uncertainty.
Bitcoin [BTC] reached a new monthly high of $61.3K on September 17, just a few hours before the Fed’s decision on September 18.
BTC has recovered about 14% from the early August low and was back at the previous low.
Source: BTC/USD, TradingView
Expectations of a possible Fed rate cut have partially fueled BTC’s recent rebound. Last week, US economic data confirmed a disinflationary trend, while the US labor market stagnated.
This has prompted some policymakers and US politicians to call for a 0.75% Fed rate cut to ease labor markets.
At the time of writing, interest rate traders were expecting a 63% chance of a 0.50% (50 bp) Fed rate cut. This was a huge reversal from the 14% chance of a 50 basis point rate cut a week ago.
Source: CME FedWatch
Impact of interest rate cuts
Market observers agree that Fed rate cuts are structurally bullish for risk markets, given relatively cheaper credit.
However, some believe that a 50 basis point cut was an aggressive move that would indicate the Fed’s concerns about the economy. This may not be good for risky assets like crypto in the short term.
Meanwhile, the whales appeared well positioned for the Fed’s interest rate decision. CryptoQuant founder Ki Young Ju noted BTC whales have been aggressively collecting BTC during an intensification over the past six days delivery shock.
Source: CryptoQuant
Additionally, US spot BTC ETFs showed increased demand, with net daily inflows of $186.76 million on Tuesday. This strengthened investors’ risk appetite in the run-up to the Fed’s decision.
However, at the time of writing, demand from US investors was not too strong, as illustrated by a negative reading of the Coinbase Premium Index.
Source: CryptoQuant
This demonstrated near-term market uncertainty amid a possible first Fed rate cut since 2020. Whether the risk-on approach of US BTC ETF investors in the spot market will continue after the Fed decision remains to be seen.