The price of Bitcoin and other cryptocurrencies has seen a slight increase in anticipation of the Federal Reserve’s upcoming monetary policy decision. Traders have been eagerly placing bullish bets, which could potentially result in increased volatility in the crypto markets.
Within the past 24 hours, the price of Bitcoin has inched up by less than 1%, surpassing $27,150. This marks its highest point in September thus far. Notably, Bitcoin has comfortably moved beyond the $26,000 range, which has been the dominant trading zone for the past month. This period has been characterized by unusually low levels of volatility and trading volumes.
Analyst Wael Hammad from broker XS.com commented on the market situation, stating, “Some relative stability in the cryptocurrency market, led by Bitcoin, which stabilized near the $27,000 level.” He further noted that all sectors of the market are eagerly awaiting the Federal Open Market Committee’s upcoming decision.
Similar to traditional markets such as the Dow Jones Industrial Average and S&P 500, cryptocurrencies are expected to respond to the Federal Reserve’s rate decision. The announcement is set to take place at 2 p.m. Eastern time.
The Central Bank and Bitcoin
The central bank’s upcoming decision on borrowing costs has left many wondering what the future holds for Bitcoin. As expectations fluctuate regarding the possibility of another rate-hike or whether financial conditions are tight enough to rein in inflation, all eyes are on the central bank’s next move in November.
Bitcoin, in particular, has been feeling the pressure since the Fed initiated its tightening cycle last year. When risk-free cash provides higher returns, the demand for riskier assets like cryptocurrencies tends to dampen. This ongoing interest rate environment remains a crucial factor influencing Bitcoin’s performance.
Traders have taken significant bullish positions on Bitcoin within the perpetual futures market, which is known for its liquidity and leverage. On Binance, the world’s largest crypto futures market, Bitcoin open interest (the capital invested in active futures contracts) has risen for three consecutive days, reaching $3.3 billion, as reported by Coinglass.
With such substantial leverage tied to bets that expect prices to rise, any hawkish move from the central bank could unsettle traders and trigger a wave of selling. Consequently, this could lead to a sharp decline in Bitcoin prices as leveraged traders face the liquidation of their positions.
Crypto Market Update
Beyond Bitcoin, Ether —the second-largest cryptocurrency— traded less than 1% in the red at $1,640. Smaller tokens, or altcoins, showed mixed performance, with Cardano experiencing a slight decrease of less than 1%, while Polygon witnessed a climb of 1%.
Meme-based coins remained relatively stable, as Dogecoin hovered just below being unchanged and Shiba Inu recorded a minor increase of less than 1%.