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Key Takeaways
The FOMC meeting is today, and the Federal Reserve will likely cut rates.
If so, this will be the first rate cut since November 2024, when the rates fell to 4.5%.
How has Bitcoin (BTC) reacted to previous rate cuts, and how will it react this time?
The Federal Reserve is back in focus as today’s FOMC meeting could result in the first rate cut of 2025.
Markets are almost certain that a reduction is coming, with traders betting heavily on at least a 0.25% move.
This article will analyze how the decision will affect the Bitcoin price moving ahead in the short- and long-term.
Fed Rate Cuts
For over a year, the U.S. Federal Reserve kept its interest rates steady at 5.5% between July 2023 and August 2024.
Rate cuts began in August and continued until December, lowering the interest rate to 4.5%.
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However, the decline did not last, since the interest rates have remained at 4.5% since.
In light of today’s FOMC meeting, the market gives a 91% chance of a 0.25% cut, a 7% chance of a 0.5% cut, and a 3% chance of no change. The market is overwhelmingly expecting rate cuts in September for the first time this year.
Interest Rate Cut | Credit: PolymarketPreviously, the Federal Reserve kept the rate constant below 1% for more than two years between 2020 and 2022, but then started an almost unprecedented hike until the start of 2024.
Interest Rate History | Credit: Trading Economics
Since the market predicts a September rate cut, this article will analyze the previous periods of rate cuts and how the Bitcoin price reacted to them.
Bitcoin’s Reaction to Rate Cuts
The previous Fed rate cut news in September 2024 marked the absolute bottom, triggering a Bitcoin bull run that is still ongoing.
Since the rate cut, the Bitcoin price (purple) has increased by 100%.
Most of the rally occurred between September and December 2024, creating a direct, positive correlation between rate cuts and the Bitcoin price.
The next step is looking at how the Bitcoin price reacted the day the cuts were announced.
On Sept. 19, 2024, the Federal Reserve announced a 0.5% interest rate cut, above the 0.25% expectations.
Hence, the Federal Reserve introduced a rate cut larger than expected.
Interestingly, the Bitcoin price did not react that much to the news, creating a bullish candlestick with a magnitude of 1%.
The upward trend lasted for over a week, but the Bitcoin price eventually returned to its pre-news price before resuming its upward trend.
The next rate cuts were on Nov. 7 and Dec. 17, respectively. The first one accelerated the bullish trend to new highs, but the rally might have actually happened because of Donald Trump’s election win.
Interestingly, the final rate cut on Dec. 17 marked the beginning of a prolonged bear market (red icon).
The second and third rate cuts were 0.25%, as expected.
Though the analysis of the three previous rate cuts does not show a clear short-term correlation between the Bitcoin price and the interest rate cuts, in the long term, rate cuts have catalyzed a bull market.
What Will Happen in September?
Adding to the uncertainty, the Bitcoin price trades at a precarious level that can lead to both a rejection and a breakout.
Currently, the price of Bitcoin is at a critical confluence of resistances between $115,900 and $117,900.
The area is created by the 0.5-0.618 Fibonacci retracement resistance levels and is also a horizontal resistance area.
So, the direction of the Bitcoin price after the FOMC meeting today is critical.
A significant pump that leads to a daily close above $117,900 could pave the way to a new all-time high, while a rejection and bearish candlestick could catalyze a sharp decline.
However, as the price action analysis shows, Bitcoin could move either way in the short term, regardless of the FOMC interest rate decision.
Bitcoin and Rate Cuts
With Bitcoin hovering right below major resistance, the timing of the Fed’s move is critical.
A breakout could ignite fresh all-time highs, while a rejection might sharply lower the market.
As past rate cuts have shown, the short-term reaction is unpredictable.
However, the long-term trend could once again turn in Bitcoin’s favor, as occurred in September 2024.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Valdrin Tahiri is a cryptocurrency analyst and reporter at CCN, specializing in technical analysis with a focus on Elliott Wave theory, on-chain metrics, and fundamental research. He brings over seven years of experience in the crypto space as both a trader and writer.
He discovered cryptocurrencies in 2017 while earning his MSc in Financial Markets at the Barcelona School of Economics, which sparked a deep interest in blockchain and market dynamics. Since then, he’s contributed to top crypto outlets like BeInCrypto and CoinGape.
Valdrin also served as Community Manager of BeInCrypto’s Telegram group for three years, helping grow it into one of the largest crypto communities worldwide. His expertise in market structure and price patterns allows him to break down complex trends into clear, actionable insights.
He’s published thousands of articles covering altcoins, Bitcoin cycles, and macro trends.
