Bitcoin Rallies as Crypto Market Reacts to Fed Rate Cut Speculation and Q4 Optimism

Bitcoin (BTC) and the broader crypto market experienced a brief rally on Tuesday amid speculation that the Federal Open Market Committee (FOMC) could implement a 50-basis-point rate cut during its Wednesday meeting.

1. The crypto market, spearheaded by Bitcoin, has surged in recent hours as investors brace for Wednesday's FOMC meeting. 

2. The CME FedWatch Tool now suggests a higher chance of a 50-basis-point rate cut, a move that has historically aligned with crypto bull runs. 

3. Additionally, Bitcoin has a track record of outperforming in Q4, making this quarter especially promising for potential gains compared to others.

Source: Trading View

In the past, Bitcoin and the broader crypto market have thrived during times of low interest rates. This was especially noticeable in 2017 during the explosive crypto bull run and the ICO boom, when interest rates hovered between 0.75% and 1.25%. The red line indicates BTC’s movement and the blue line is the United States Interest Rate since 2017. Given that history, the current buzz around a potential 50-basis-point rate cut and the positive outlook for Q4 could ignite another strong rally in crypto assets. The combination of these factors suggests a potentially exciting period ahead for the market.

Bitcoin recently surged by 5%, reaching $61,330 ahead of the Federal Reserve's meeting, where uncertainty remains about the rate cut's impact on the market. Other cryptocurrencies like ETH, SOL, XRP, ADA, and AVAX also saw gains between 2% and 4%. However, data from KuCoin may suggest market volatility with the interest cuts. Joel Kruger from LMAX Group emphasized that much of the market's focus is on positioning ahead of the Fed's decision.

Joel Kruger from LMAX Group highlighted that much of the market's focus is now on positioning ahead of tomorrow’s anticipated Federal Reserve event. Significant BTC sell orders between $61,000 and $62,500 may cap further rally since, "A lot of the focus will be around positioning into tomorrow’s highly anticipated Fed event risk," LMAX Group's Joel Kruger said. Bitcoin led the crypto rally, hitting its highest price in September, while ETH, SOL, XRP, ADA and AVAX advanced 2%-4%.

Bitcoin (BTC) surged to $61,000 during the US trading session on Tuesday as cryptocurrencies rallied in anticipation of the Fed's upcoming meeting where it's widely expected that the central bank will reduce its benchmark interest rate for the first time in 4 years.

Leading the digital asset market Bitcoin hit $61,330 marking its highest price in three weeks before retracing some of its gains. It’s currently hovering just below $61,000 still reflecting an impressive 5% increase over the past day.

Meanwhile the CoinDesk 20 Index which tracks the broad crypto market gained 3% reaching 1,880 with most altcoin majors like Ethereum (ETH) Solana (SOL) Ripple’s XRP Cardano (ADA) and Avalanche (AVAX) showing more moderate increases of 2% to 4%.

Despite the upward surge, Bitcoin remains trading in a relatively narrow trading range and with the Federal Open Market Committee (FOMC) meeting on the horizon a breakout seems unlikely due to the fact that. Despite the rally, bitcoin continues to trade in a fairly tight range and seems unlikely to break out before Wednesday's meeting of the Fed's Federal Open Market Committee (FOMC). The market is still extremely uncertain on whether the Fed will cut 25 basis points or opt for a larger 50 basis point move.

BTC Quarterly Returns | Source: Coinglass

As Q4 approaches, crypto investors are hopeful for a rebound from the market lull seen in Q3. Historically, Q4 has been Bitcoin's strongest quarter, with an average gain of 88.84%.As a result, optimism around Q4 and the potential for a 50-basis-point rate cut could trigger a significant bull run in the crypto market.

Read More: Bitcoin Could Rally to $90,000 If Trump Wins the US Election: Bernstein