Bitcoin Slips to $58K Amid Split Fed Rate Cut Expectations: What’s Next?

Bitcoin has pulled back to $58,000 as uncertainty around the Federal Reserve’s upcoming rate decision takes center stage.

With the Fed meeting set for Wednesday, the market remains split on whether to expect a 25 basis point (bps) or 50 bps rate cut. This uncertainty has led to a temporary pause in Bitcoin’s upward momentum, stalling its climb from recent lows of $52,530.

The Fed funds futures currently reflect a 50% probability for both a 25 bps and a 50 bps rate cut, leaving traders unsure about the Fed’s next move. Historically, rate cuts have supported risk assets like Bitcoin, but a larger-than-expected cut could signal deeper concerns about the U.S. economy, potentially dampening investor sentiment.

$BTC Bitcoin broke the $58k level and came down to retest the $58k level and it's holding strongly. good signs for upside if it hold this level some more time and then move🚀.#BITCOIN #Crypto #CryptoInvestor #BTCUSDT https://t.co/wQAV5Tene0 pic.twitter.com/mflPG28Ciu

— Trading Buddha (@TradingBuddha_) September 17, 2024

Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, noted the unusual level of uncertainty going into this Fed meeting. “Rarely has the market gone into the Fed meeting with maximum uncertainty. A 50 bps cut could indicate economic panic and weigh on riskier assets, including cryptocurrencies,” Chandler stated.

Rate Cut Speculation and Bitcoin’s Price Movements

Bitcoin’s latest retreat from $60,660 to its current level of $58,000 can largely be attributed to speculation surrounding the Fed’s rate cut decision. A 50 bps cut, as proposed by some analysts, may reflect the Fed’s growing concern over economic stability, potentially shaking confidence in risk assets like Bitcoin.

On the other hand, if the Fed opts for a 25 bps cut, traders might view this as a more measured approach, which could stabilize Bitcoin and other risk assets. The recent rise in the likelihood of a 50 bps cut came after a Wall Street Journal article by Nick Timiraos reignited the debate, causing traders to reassess the odds of a more aggressive rate reduction.

Chandler also pointed out that the market is currently pricing in a sub-3% Fed funds target by the end of next year, further contributing to the uncertainty.

Bitcoin Price Forecast: Will Support Hold?

Looking at the 2-hour Bitcoin chart, a clear upward trendline starting from the recent local low near $55,500 provides strong support at around $57,668. Bitcoin has bounced off this level several times, reinforcing its importance as a short-term support zone.

The 50-period Exponential Moving Average (EMA), currently sitting at $58,748, acts as immediate overhead resistance. Bitcoin is trading just below this level, suggesting that bulls need to reclaim the EMA to continue the upward momentum.

$btc #bitcoin another weak daily #ltf close just above 58k, if reclaim of 60.6 happens before this weeks weekly close it could continue to 64.6 #crypto main bias from #TA still 🦀 pic.twitter.com/sfu3CTdtlf

— punk5122 (@punk5122) September 17, 2024

RSI: The Relative Strength Index (RSI) is at 35.57, indicating slightly oversold conditions. A bounce could be on the horizon as the RSI begins to recover from this low.

Key Levels: If Bitcoin can hold the $57,668 support and break through the 50-EMA, it may rise toward $59,176 or higher. However, failure to maintain this support could see Bitcoin retesting lower levels around $56,568 or even $55,517.

What’s Next for Bitcoin?

Traders will be closely watching the Fed’s decision on Wednesday. The size of the rate cut could significantly impact Bitcoin’s price in the near term. A 50 bps cut might signal deeper economic concerns and could weigh on risk assets, while a 25 bps cut could offer more stability, potentially supporting a renewed rally in Bitcoin.

Until then, Bitcoin remains on edge, with $57,668 as a crucial support level and $58,748 as the next key resistance point. The upcoming Federal Reserve meeting will likely set the stage for Bitcoin’s next major move.