Bitcoin Price Faces Potential Reversal After Fed’s Decision

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As a seasoned crypto investor with over a decade of experience in this volatile market, I’ve seen my fair share of ups and downs. However, the current surge in Bitcoin‘s price to an all-time high of $108,000 is hard to ignore. The growing popularity among investors, competing with gold as an investment choice, is a testament to its increasing acceptance.

As an analyst, I am compelled to highlight that I personally witnessed Bitcoin reaching an unprecedented peak of $108,000 on December 17, marking another significant milestone in its ongoing ascent that began in the year 2023. Remarkably, the price of this digital currency has experienced a staggering surge of approximately 150% in just this year. This impressive rise can be attributed to heightened demand and a noticeable deceleration in its production rate.

Lowering interest rates by organizations like the Federal Reserve and other central banks has contributed significantly to the rise in Bitcoin’s value.

As reported by SoSoValue, Bitcoin Exchange-Traded Funds (ETFs) accumulated approximately $36 billion in assets, boosting the overall value to surpass $120 billion. This trend signifies a growing interest among investors towards Bitcoin, as it increasingly rivals gold as a preferred investment option.

Eric Balchunas pointed out that the combined assets of Bitcoin ETFs (including spot, futures, and leveraged) have reached a staggering $130 billion, surpassing gold ETFs which hold $128 billion. Interestingly, spot Bitcoin ETFs account for almost as much, approximately $120 billion, compared to gold’s $125 billion. He finds it astounding that they are so close in value, considering the relatively short timeframe of 11 months.

The rate at which new Bitcoins are created (mined) has decreased because of an increase in mining complexity, as indicated by CoinGlass statistics. Furthermore, it’s been observed that the quantity of Bitcoin held on trading platforms has consistently gone down in 2021.

Over the long term, this disproportion between supply and demand might lead to an increase in Bitcoin’s price. This is due to the rising attention from both governments and large corporations, similar to how MicroStrategy became a $90 billion enterprise.

On Wednesday, the Federal Reserve’s decision regarding interest rates might influence Bitcoin. Many economists anticipate a reduction of 0.25%, a move that typically boosts Bitcoin and other high-risk assets.

In contrast, if the Federal Reserve continues to exercise caution due to persistent inflation worries, this could potentially curb the increase in Bitcoin’s value. The latest inflation figures indicate ongoing difficulties, as the Consumer Price Index climbed to 2.7%, while the core CPI reached 2.2%.

Lately, Bitcoin’s trend has been surging noticeably, consistently remaining above significant moving averages, which suggests that the market is dominated by optimistic investors (bulls). Additionally, it appears to have shaped a “cup and handle” chart pattern, implying further possible price increases.

On the other hand, the graph exhibits a rising wedge formation, suggesting a potential reversal might occur. Moreover, there’s a bearish divergence in the MACD and Relative Strength Index, implying a possible drop to approximately $103,000 following the Federal Reserve’s interest rate decision on Wednesday.

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2024-12-17 23:49