Bitcoin traders are not only monitoring the Fed's interest rate decision this week—they are focusing on the dot plot chart, which could hint at future rate cuts.
Although interest rates are widely expected to remain unchanged, what Fed Chairman Jerome Powell signals next could change the situation. Currently, Bitcoin is stuck in a narrow range, with short sellers crowded in and large holders quietly buying.
With ETF inflows appearing weak and negative funding rates, most traders are playing it safe. But if Powell hints at rate cuts, this could trigger a strong upward move, potentially pushing Bitcoin above $112,000. On the other hand, a hawkish tone could see it slide back to $100,000.
All eyes are on the dot plot chart.
The Federal Reserve is widely expected to keep interest rates in the range of 4.25%–4.50%. The official decision will be announced on Wednesday at 2 PM Eastern Time, followed by a press conference from Fed Chairman Jerome Powell.
However, this part has largely been priced in. The real action lies in the Fed's dot plot chart, which shows where each policymaker sees interest rates heading in the coming months and years. If the dot plot signals fewer rate cuts than expected, this could reinforce the 'higher for longer' narrative, bolstering the dollar and putting downward pressure on Bitcoin and other risk assets.
Why are Bitcoin traders interested?
Bitcoin prices have cooled off after hitting highs above $100,000 and the Fed's hawkish outlook could deepen that consolidation. XBTO, a cryptocurrency trading firm, said traders are bracing for volatility if the dot plot reflects less dovish expectations.
According to analyst Matteo Greco from Fineqia, expectations for rate cuts in 2025 have decreased from 100 basis points down to just 50 basis points, and could drop further to 25 basis points if global tensions continue.
The long-term outlook remains optimistic.
Interestingly, the Fed's tougher stance is not only putting pressure on cryptocurrencies in the short term but also boosting long-term prospects. Higher interest rates increase the cost of borrowing for the U.S., worsening financial outlooks. That move could enhance Bitcoin's role as a hedge alongside gold, especially as inflation and global instability remain in focus.
Currently, patience is key to the game. Until the dot plot and Powell's commentary are revealed, the cryptocurrency market may remain cautious, watching for any changes that could freeze or propel Bitcoin's next move.
Although Bitcoin prices are in a tough spot due to various factors, technically, CryptoQuant highlights a key metric of Bitcoin that could signal its next big move.
According to analyst @oro_crypto, if Bitcoin continues to follow the typical growth pattern seen in the third year of the cycle, it could increase by about 120% by 2025. This suggests that despite short-term volatility, the overall trend could still favor a strong upward trajectory in the future.
