According to analyst Yuya Hasegawa from Bitbank, it may take up to a week for traders in Bitcoin to fully understand the implications of the Federal Reserve’s initial interest rate reduction in nine months.
In a note shared with Decrypt, the Tokyo-based analyst stated, “The ongoing risk-on sentiment following the FOMC meeting is viewed as an additional boost for Bitcoin, bringing a target of $120,000 into view. If BTC manages to surpass this level, we might finally see a complete retracement. The market will likely need about a week to process these developments before returning its focus on inflation and further rate cuts.”
The upcoming week features anticipated comments from Federal Reserve Chair Jerome Powell and Vice Chair for Supervision Michelle W. Bowman on Tuesday. While this week’s updated dot plot from the Federal Open Markets Committee hinted at two potential rate cuts in 2025, Powell refrained from making any commitments.
Traders are expected to analyze every nuance during speeches by Powell or other FOMC members closely. Looking ahead to October’s meeting, 72% of participants on Myriad—a prediction market owned by Dastan, which is also Decrypt’s parent company—foresee another cut of 25 basis points; nearly 11% believe that rates will remain unchanged during this second-to-last meeting of the year.
Bulls anticipating rate cuts are even more pronounced according to data from CME FedWatch Tool; approximately 92% of traders expect another reduction by 25 basis points next month while only about 8% think that no cut will occur.
“Currently, concerns linger regarding a stronger dollar and weaker bonds (higher yields),” Hasegawa noted in his analysis. “However, this reaction can be interpreted as short-term since bond markets have overly anticipated cuts for next year.”
An analysis team at Deutsche Bank mentioned they would be attentive for clues regarding future actions when Powell speaks on Tuesday. They also advised traders to pay close attention to new consumer spending figures set for release by the Bureau of Labor Statistics on Friday, September 26.
The analysts indicated that their U.S. economists project month-over-month growth in core PCE at around 0.22%, down slightly from July’s figure of 0.3%. They forecast personal income and consumption growth slowing down to about 0.3%, compared with July’s figure of 0.4%, while predicting spending increases will hold steady at around +0.5%.
At present time, Bitcoin options trading indicates that many traders are opting for premium cash-ins rather than waiting anxiously for significant price movements; Jake Ostrovskis—the head of OTC trading at digital asset market maker Wintermute—shared these insights.
“Current flows indicate an emphasis on premium selling and upside caps,” he explained in his note shared with Decrypt. He added that many traders are engaging in call spreads between $125K and $150K range suggesting they do not foresee Bitcoin trading significantly above those levels anytime soon.
“Overall positioning appears focused more towards range-bound strategies and carry harvesting instead of taking aggressive directional risks,” he concluded.