The Federal Reserve will hold its first “interest rate” meeting of 2024, and the finance market expects it to keep unchanged. Bitcoin’s (BTC) recent price action reflects these expectations. In the past, interest rate hikes caused BTC to drop in value.
Notably, the United States central bank target rate remains unchanged since the last hike in July 2023. In the past six months, Bitcoin, other cryptocurrencies, and the stock market positively reacted to this target interest rate stability.
Federal funds historical chart. Source: New York FED
This scenario can continue on January 31 if the Federal Reserve follows the market’s expectations. In particular, 97.9% of interest-rate traders believe the target will continue the same, according to CME Group.
Target rate probabilities for 31 JAN 2024 FED meeting. Source: CME Group
Bitcoin price analysis amid target interest rate increase
Interestingly, Bitcoin has steadily traded in a consolidation range since December 2023 despite two brief deviations.
The first deviation occurred to the upside on the first trading day of the approved Bitcoin spot ETFs. Meanwhile, the second deviation happened two weeks after the first, following a “sell the news event” downtrend. These two in the $41,647.20 support level and $44,371.00 resistance level.
BTC/USD daily chart. Source: TradingView
On December 29, only 82% of the market expected the Federal Reserve to keep the same target. Therefore, traders may have been trying to price this month’s interest rate decision, explaining the recent action.
Although this highly expected decision could have already been priced, we expect a volatile day for the cryptocurrency market. Thus, cryptocurrency traders and investors must act cautiously in the hour before and after the decision. The market may see meaningful liquidations for long and short positions as participants digest the Federal Reserve decision and communication.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
