Bitcoin [BTC] has surged to a fresh monthly peak of $61.3K on the 17th of September, just ahead of the Fed’s scheduled decision on the 18th of September.
Following a period of decline in early August, BTC has rebounded by approximately 14% and returned to its previous trading range.
Significance of Interest Rate Reductions
Market analysts concur that Fed interest rate cuts generally have a positive impact on risk markets by making credit comparatively more affordable.
However, some experts have suggested that a 50 bps reduction would be an assertive action signaling the Fed’s unease about the economy, which may not bode well for risk assets such as cryptocurrencies in the short run.
Meanwhile, major holders of BTC, known as whales, have been strategically accumulating significant amounts of BTC over the past six days amidst escalating supply constraints, as highlighted by CryptoQuant founder Ki Young Ju.
Furthermore, there has been a noticeable rise in demand for U.S. spot BTC exchange-traded funds (ETFs), with a net daily inflow of $186.76 million on Tuesday. This surge in demand has bolstered investor confidence in anticipation of the upcoming Fed decision.
Yet, the current outlook from U.S. investors appears somewhat subdued, indicated by a negative figure from the Coinbase Premium Index.
Such market fluctuations are indicative of short-term ambiguity linked to the impending first Fed rate cut since 2020. The sustainability of the risk-taking stance observed among U.S. spot BTC ETF investors post the Fed’s verdict remains uncertain.