Bitcoin Holds Above $116,000 Ahead of Fed Rate Decision
Bitcoin (BTC) is trading above $116,000 as of Wednesday. Traders expect more price swings after the Federal Reserve’s rate cut decision later today. A move toward $120,000 is possible, but on-chain data shows mixed signals. This suggests some traders are cautious despite the current bullish trend.
Fed Rate Cut May Increase Bitcoin Volatility
Bitcoin price is steady above $116,000 during the European session. BTC recovered from a low of $107,255 on September 1 to close above $116,700 on Tuesday. This marks three weeks of gains in a row.
Markets expect the Fed to cut interest rates by at least 25 basis points after its two-day meeting. The Fed aims to support the weakening labor market.
Investors are also watching the Fed’s dot plot closely. This chart shows how policymakers expect rates to change in the coming years. QCP Capital said, “Investor focus is squarely on the Summary of Economic Projections (SEP) for clarity on the pace and scale of easing through 2026.”
Currently, markets price in three rate cuts in 2025 and three more in 2026. Any changes to these forecasts and Fed Chair Jerome Powell’s press conference will guide the near-term policy path.
QCP analysts added, “If the Fed matches this expectation (‘Goldilocks’ balance), financial conditions will remain supportive for risk assets, such as stocks and crypto.”
However, crypto is lagging behind stocks. It may not rise as much unless momentum improves.
Bitcoin Volatility Remains Low Before Fed Announcement
Bitcoin’s price action shows low volatility. The 7-day volatility hit a yearly low below 0.7% last Tuesday. It rose slightly as BTC passed $115,000 but stayed near 1%. This low volatility often comes before sharp price moves.
The Fed meeting could trigger such a move.
On-Chain Data Shows Mixed Signals
CryptoQuant reports that Bitcoin selling pressure is low before the Fed decision. Large Bitcoin deposits to exchanges have dropped. The 7-day average of BTC flowing into exchanges fell to 25,000 BTC, one of the lowest in over a year. This is down from 51,000 BTC on July 17, when BTC first hit $120,000.
The average deposit size also fell from 1.14 BTC in mid-July to 0.57 BTC in September. This points to less selling pressure.
Meanwhile, USDT (Tether) deposits to exchanges are rising. This shows investors are preparing for possible market moves. Net USDT deposits increased from $273 million in early April to $379 million at the end of August, the highest this year. Large deposits drive this rise, with average daily deposits growing from $63,000 in July to $130,000 recently.
Still, traders remain cautious. Funding rates are unstable and below neutral levels. Many are hesitant to increase long positions.
Bitcoin Price Outlook: $120,000 or Drop to $107,000?
Bitcoin has faced resistance near $116,000 since last Friday. It stayed below this level for three days but closed above it on Tuesday. On Wednesday, BTC trades around $116,400.
If $116,000 holds as support, Bitcoin could rise toward the $120,000 mark.
The Relative Strength Index (RSI) is at 59, above the neutral 50 level. This shows growing bullish momentum. The Moving Average Convergence Divergence (MACD) indicator showed a bullish crossover on September 6, supporting the uptrend.
However, if Bitcoin falls below $116,000 and closes there, it could drop to the next support at $107,245.
