Bitcoin price may see a harsh reversal after Fed decision

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As a seasoned crypto investor who has seen the digital coin market evolve since its early days, I must say that the current Bitcoin rally is truly remarkable. Having witnessed the wild swings and market crashes, it’s fascinating to see Bitcoin competing with gold for investor attention, especially considering its humble beginnings as a niche asset.

On December 17th, the value of one Bitcoin soared to an unprecedented peak of $108,000, extending a remarkable upward trend that had started in the year 2023.

This year, Bitcoin (BTC) has experienced a significant increase, approximately 150%, primarily due to increased demand and slower growth in its supply. Additionally, the reduction of high-interest rates by organizations like the Federal Reserve and other central banks has played a role in fueling this price rise.

According to data from SoSoValue, the collective value of Bitcoin exchange-traded funds (ETFs) trading on the spot market now exceeds $36 billion, bringing their combined total to over $120 billion. This substantial growth suggests that Bitcoin is gaining more and more interest from investors as a potential competitor to gold.

People asking me about this. Answer is YES, if you include all bitcoin ETFs (spot, futures, levered) they have $130b vs $128b for gold ETFs. That said, if you just look at spot, btc is $120b vs $125b for gold. Either way, unreal we even discussing them being this close at 11mo.

— Eric Balchunas (@EricBalchunas) December 17, 2024

The increase in mining difficulty for Bitcoin hasn’t led to a robust growth in its supply, according to data from CoinGlass. This year, the quantity of Bitcoin held in exchanges has consistently decreased.

It’s quite probable that the interplay of supply and demand could lead to an increase in Bitcoin prices over the long run. The increased demand for Bitcoin is expected to stem primarily from governments and large corporations, as we’ve witnessed Microstrategy grow from a small entity into a $90 billion conglomerate by investing heavily in Bitcoin.

Upcoming Federal Reserve decision on Wednesday may significantly influence Bitcoin. Many economists anticipate a 0.25% rate reduction, making it the third cut this year, amounting to a total of 1%.

Investors tend to favor Bitcoin and high-risk assets more when the Federal Reserve reduces interest rates, as they prefer to shift their funds away from low-yield savings accounts.

The Federal Reserve could potentially halt the rise in Bitcoin prices by adopting a tough stance on inflation, as it’s worried about Donald Trump’s policies such as deportations, tax reductions, and tariffs fueling inflation.

Last week’s data release indicates that inflation continues to pose significant issues, as the overall Consumer Price Index increased to 2.7%. It’s important to note that the Core CPI, which disregards fluctuating food and energy prices, held steady at 2.2%. Consequently, it seems plausible that the Federal Reserve will lower interest rates this week, but their outlook might lean towards a more cautious approach.

Bitcoin price analysis

Over the last several weeks, the daily graph indicates a robust upward trajectory for Bitcoin (BTC). Notably, its price persistently stays above significant moving averages, implying that bullish forces continue to dominate. Furthermore, BTC has shaped a cup and handle pattern, which typically suggests further price increases.

Meanwhile, the graph shows an upward sloping wedge formation, often indicative of a potential trend reversal. Additionally, the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) have created bearish divergence patterns.

After the Federal Reserve’s interest rate decision on Wednesday, there might be a temporary dip, possibly down to around $103,000.

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2024-12-17 20:30