Is Bitcoin Headed for the “Danger Zone” Ahead of Fed Rate Decision?

As the Federal Reserve gears up to make its interest rate decision, all eyes are on how Bitcoin will fare amidst the economic anticipation.

This week marks a pivotal moment on the US economic front, with the Federal Reserve scheduled to announce its interest rate decision on March 20, setting the trajectory for the nation’s economic path ahead.

Highlighted Events for the Week Include:

1. Release of Housing Starts data – Tuesday
2. Fed Interest Rate Decision – Wednesday
3. Fed Press Conference – Wednesday
4. Publication of Philly Fed Manufacturing Index – Thursday
5. Release of Existing Home Sales data – Thursday
6. Speech by Fed Chair Powell – Friday

Amidst this economic buzz, data from the Chicago Mercantile Exchange suggests a high probability, around 99%, of the Fed maintaining current interest rates. Market expectations have shifted, with forecasts now projecting only three interest rate cuts in 2024, a significant reduction from previous estimates.

Initially, markets speculated as many as seven rate cuts for the year, but with inflation data showing signs of resurgence, optimism for multiple cuts has tempered. The current interest rate in the US stands at 5.5%, a status maintained since July 2023 amid inflationary pressures.

Beyond the US, countries including Australia, the United Kingdom, and Japan are also slated to reveal their interest rate decisions this week, promising a week of potential market volatility.

In the realm of cryptocurrencies, particularly Bitcoin, recent institutional interest fueled by spot ETF launches in the US has provided support. However, with daily ETF inflows tapering off and the halving event drawing nearer, this enthusiasm may be diminishing.

Crypto analyst ‘Rekt Capital’ recently warned of Bitcoin entering a precarious “Danger Zone” this week, historically associated with retracements before halving events. These retracements, observed between two and four weeks prior to previous halvings, have seen significant declines. In 2020, Bitcoin experienced a retracement of -20%, while in 2016, it saw a retracement of -40%.

Already, Bitcoin has retreated 7.7% from its March 14 all-time high of $73,738, currently trading at $68,100 at the time of writing. As the Federal Reserve’s decision comes to light and market dynamics evolve, the trajectory of Bitcoin remains uncertain, with potential volatility ahead.