Journalist
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The last meeting of the year of the US Federal Reserve started on December 9. That of the CME group Fed Watch tool showed that traders and investors expect a rate cut of 25 basis points, while only a small probability is assigned to it a reduction of 50 bps.
The expected interest rate cuts are expected to stimulate the economy by lowering borrowing costs. The Fed has maintained this stance in recent months, having already announced cuts in September and October.
In one message on XFutures trader Ardi pointed out that a rate cut may not be immediately bullish for Bitcoin [BTC]. The 25 basis point interest rate cuts in September and October were followed by Bitcoin price drops of 8% and 12% respectively.
Is the FOMC announcement already priced in?
There was a pattern to this move, the analyst explained. Before the actual announcement of the easing rates, the market tends to put expectations first.
The actual rally would have already ended by the time of the upcoming FOMC announcement.
Source: BTC/USDT on TradingView
This helped explain Tuesday’s rally, with Bitcoin gaining 5.7% in 12 hours to reach $94,000. However, as the 4-hour chart shows, the rally went up, but not outside the supply zone (the red box) that has been in place since mid-November.
The OBV rose slowly in December. It is unclear whether this buying pressure is enough to push prices up.
The structure was also bullish on the H4 chart, with a bullish structure break (orange) on Tuesday. If the buyers can keep up the pressure, it is possible to break the USD 94,000 resistance.
As the previous post-FOMC BTC dips show, this break may take more time.
Source: BTC/USDT on TradingView
On the 1-hour chart, bullish pressure remained intact at the time of writing. The imbalance (white box) in this time frame reached $90.6k.
Explanation of the bullish Bitcoin scenario
As things stand now, the bullish reaction appears to have been postponed. It could be because the market is waiting for macroeconomic news. In this case, a move beyond $96,000 and a retest of the $94,000-$95,000 area as support would provide a buying opportunity.
Bitcoin Traders: Stay Neutral or Lean Bearish
The bearish scenario was the most likely outcome. The lack of a strong response from the retest of the first half imbalance around $92.5k suggested that a short-term dip to $90.6k, the bottom of the gap, is on the way.
Traders should be on the lookout for moves below $90.6k and $89.9k as the first indications of a deeper retracement.
The price drop could reach $88,000, or even $84,000, before the recovery begins. Traders should be prepared for both scenarios, but should not rush to open positions right away.
Final thoughts
- The previous interest rate cut announcements were not followed by strong, sustained price increases for Bitcoin, given the longer-term downward trend.
- Therefore, traders can now remain bearishly biased until the $96k resistance level is broken.
Disclaimer: The information presented does not constitute financial advice, investment advice, trading advice or any other form of advice and is solely the opinion of the writer