The U.S. Federal Reserve’s final meeting of the year began on the 9th of December. The CME Group’s Fed Watch tool showed that traders and investors expect a 25 bps rate cut, while assigning only a small probability to a 50 bps cut.
Anticipated rate cuts are expected to boost the economy by lowering borrowing costs. The Fed has maintained this stance in recent months, having already announced cuts in September and October.
In a post on X, Futures trader Ardi pointed out that a rate cut might not be immediately bullish for Bitcoin [BTC]. The 25 bps rate cuts in September and October were followed by a Bitcoin price drop of 8% and 12%, respectively.
Has the FOMC announcement been priced in?
There was a pattern to the move, the analyst explained. Before the actual announcement of the easing rates, the market tends to front-run the expectation.
The actual rally would already have finished by the time of the upcoming FOMC announcement.
This helped explain the rally on Tuesday that saw Bitcoin gain 5.7% in 12 hours to reach $94k. However, as the 4-hour chart shows, the rally moved up but not beyond the supply zone (red box) in place since mid-November.
The OBV has been slowly trending higher in December. It is unclear if this buying pressure is enough to propel prices higher.
The structure was also bullish on the H4 chart, with a bullish structure break (orange) seen on Tuesday. If the buyers can keep up the pressure, it is possible to breach the $94k resistance.
As the previous post-FOMC BTC dips show, this break might need more time.
On the 1-hour chart, the bullish pressure remained intact at press time. The imbalance (white box) on this timeframe extended down to $90.6k.
Explaining the bullish Bitcoin scenario
As things stand, the bullish reaction seems delayed. It could be because the market is waiting for macroeconomic news. In this case, a move beyond $96k and a retest of the $94k-$95k area as support would offer a buying opportunity.
Bitcoin traders, stay neutral or lean bearish
The bearish scenario was the more likely outcome. The lack of a strong reaction from the retest of the H1 imbalance around $92.5k suggested that a short-term dip to $90.6k, the low of the gap, is incoming.
Traders should be wary of a move below $90.6k and $89.9k as the first clues of a deeper retracement.
The price dip could go as deep as $88k, or even $84k, before recovery begins. Traders should be prepared for either scenario, but need not rush to open positions right away.
Final Thoughts
- The previous rate cut announcements were not followed by strong, sustained Bitcoin price rallies, given the longer-term downtrend in place.
- Therefore, traders can remain bearishly biased now until the $96k resistance level is breached.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
