- Bitcoin price is making steady gains, heading toward the $27,000 level after bearish August.
- BTC holders are closely watching the Federal Reserve interest rate decision at the FOMC meeting that concludes on September 20.
- Bitcoin price could benefit from upside volatility if there is no change in rates, but rate hike could increase selling pressure on BTC.
Bitcoin price action of late has fueled optimism among traders as the asset climbs toward $27,000 after a weak performance throughout August and the first two weeks of September. BTC holders are likely watching the Federal Open Market Committee (FOMC) meeting on Wednesday closely for cues on where the asset’s price is headed next.
The US Federal Reserve’s interest rate decision could act as a potential volatility driver for the asset as macroeconomic factors have had an impact on BTC prices throughout 2023.
Also read: XRP price fights risk of decline, sustains above $0.50 despite NYDFS action
Bitcoin price eyes $27,000 ahead of Fed rate decision
Bitcoin price is heading into a volatility-filled week with the Federal Reserve meeting on Wednesday. This event is key to BTC as the US Central bank will make a decision on interest rates, a macroeconomic factor that has typically influenced the cryptocurrency’s price.
Market participants do not expect the Fed to pivot from its stance on interest rates. CME’s FedWatch Tool has gathered a 99% probability of no hike and a 1% probability of an increase to 5.5% to 5.75%.
Target rate probabilities for Fed’s interest rate decision on September 20
No interest rate hike could result in Bitcoin price recovery gaining strength. An interest rate hike on the other hand could spring a surprise on BTC holders and increase the selling pressure on Bitcoin. Additionally, hawkish rhetoric may increase the odds of a hike later this year and thus lead to a sell-off in crypto assets.
The knee-jerk reaction in the past to interest rate hikes by the US Central bank has been a downside surprise to BTC price as market participants rapidly pull capital out of risk assets like cryptocurrencies.
Traders’ focus will be on the Summary of Economic Projections (SEP), a consensus among Fed governors for how the economy will shape up during the current calendar year and the next two years. This forecast is likely to set the tone for the rest of 2023 and help determine the direction in which BTC price is headed for the end of the year.
Whales sit on the sidelines, await FOMC outcome
Based on data from crypto intelligence tracker Santiment, as of Tuesday, Bitcoin’s large wallet investors are sitting on the sidelines. The surge in Bitcoin address activity and the short-lived price rally in response to the US CPI report acted as volatility drivers for BTC in September.
The Whale transaction activity chart shows relatively low movement ahead of the FOMC decision.
Whale transaction count vs BTC price
As the FOMC approaches, on-chain analysts at Santiment highlight the need of a catalyst to drive BTC price recovery. In the short-term, there has been an increase in profit-taking among cryptocurrencies with large market capitalization.
Among these assets, BTC has recorded the highest ratio of profit vs. loss since the first week of July. This is typically considered a warning sign of an upcoming decline in BTC. The interest rate decision by the US Federal Reserve could alleviate BTC holders’ concerns,while the absence of an interest rate hike could drive the asset’s price higher and aid recovery.
Interest rates FAQs
What are interest rates?
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
How do interest rates impact currencies?
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
How do interest rates influence the price of Gold?
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
What is the Fed Funds rate?
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Like this article? Help us with some feedback by answering this survey:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
US presidential election outcome could shape the future of crypto
US citizens will go to the polls to elect a new president on November 5, and their choice could be key for the future of the crypto industry and thus the price outlook for Bitcoin (BTC).
Bitcoin ETFs beat Gold ETFs with 65% gain since launch
Bitcoin ETFs have reshaped the digital asset investment landscape since their approval in January. Their total assets under management climbed over $70 billion during the weekend, placing them ahead of other investment products, including gold.
XRP eyes 10% rally amid relisting across crypto exchanges and growing institutional demand
Ripple's XRP is trading at $0.5050 up slightly by 0.2% in the past 24 hours as it struggles to sustain a move above a key symmetry triangle resistance. Meanwhile, in its recently released Q3 report, Ripple noted the rising listing and relisting of XRP across crypto exchanges and global platforms.
Ethereum Price Forecast: ETH struggles below $2,500 amid State of Michigan pension fund investment in ETH ETF
Ethereum is trading near $2,420, down about 1% on Monday, but could bounce off a key descending trendline close to the $2,258 historically high demand zone. Meanwhile, the State of Michigan pension fund revealed an investment of $11 million in ETH exchange-traded funds.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.