Bitcoin’s historic surge past $108,000 came to a halt as traders braced for fresh signals from the US Federal Reserve on interest rates, Bloomberg reports.
Investor sentiment remains buoyed by President-elect Donald Trump’s pledge to support the crypto industry, which has fueled optimism for a more favorable regulatory environment.
The world’s largest cryptocurrency hit an all-time high of $108,315 on Tuesday before retreating to $106,400 as of 8:15 a.m. Wednesday in Singapore. The broader digital asset market also saw significant gains, with its total valuation approaching $4 trillion, according to data from CoinGecko.
President-elect Trump’s pro-crypto stance has injected fresh momentum into Bitcoin’s rally. His calls for “friendly regulations” and support for a US Bitcoin reserve have lifted market sentiment, with investors betting on a future where the United States plays a dominant role in the global crypto sector.
Adding to the bullish outlook, MicroStrategy Inc. — a company known for its heavy Bitcoin holdings — is set to be included in the Nasdaq 100 Index, a development that could further boost its share price. Market watchers view this move as another validation of Bitcoin’s growing acceptance in mainstream finance, which has contributed to increased demand for the cryptocurrency.
Bitcoin has surged more than 55% since Trump’s victory in the November 5 presidential election. Investors have been pouring into US-based exchange-traded funds (ETFs) for Bitcoin, shrugging off long-standing warnings about the token’s high volatility, overbought technical indicators, and the absence of traditional valuation models.
While Trump’s support for crypto has created a positive backdrop, traders are now closely watching the Federal Reserve’s final monetary policy meeting of the year, where a widely expected quarter-point rate cut could impact risk sentiment.
With the US economy showing signs of resilience and inflation risks tied to Trump’s broader economic agenda, there is some uncertainty about the Fed’s future policy direction.
Analysts from K33 Research, Vetle Lunde and David Zimmerman, said in a client note:
“We expect this week’s FOMC to contribute to the market’s volatility. Following the FOMC, quiet macro weeks await, potentially setting the stage for Bitcoin momentum to further materialize during the holiday season.”
The impact of Fed rate cuts on crypto markets is mixed. Lower interest rates are typically seen as supportive for riskier assets like Bitcoin, as they make traditional investments like bonds less attractive. However, any signs of hawkish Fed commentary could weigh on crypto prices.
Investor positioning suggests that many traders expect Bitcoin to continue climbing. Data from the Deribit options exchange shows that the highest concentration of open interest — or outstanding contracts — is at the $120,000 strike price, reflecting the bullish sentiment among options traders.
However, some market participants are urging caution. The round-trip in Bitcoin’s price on Tuesday, where it briefly hit $108,315 before falling back to the $106,000 range, has led some analysts to question the sustainability of the rally.
“There are reasons to be cautious about chasing Bitcoin at current levels,” warned Tony Sycamore, Market Analyst at IG Australia Pty.
The sharp pullback after reaching its intraday high suggests that short-term traders may be taking profits, and the market could see further volatility as the week unfolds.
With President-elect Trump’s support for crypto and the Federal Reserve’s rate decision on the horizon, Bitcoin’s next move is difficult to predict. The combination of regulatory optimism and monetary policy uncertainty could result in heightened market swings.
If the Fed signals a slower pace of future rate cuts, it may temper Bitcoin’s momentum. On the other hand, if the central bank emphasizes a more accommodative policy stance, it could fuel further buying in the crypto space.
Investors are also watching to see if Trump’s plans for a strategic national Bitcoin reserve materialize, as such a move would be unprecedented and could attract significant new interest in the asset.
With the holiday season approaching, a period of relative calm could follow the Federal Open Market Committee (FOMC) meeting, providing Bitcoin with a window to regain momentum. Traders will be looking for signs of whether the next leg up could push Bitcoin toward the $120,000 mark that options traders are betting on.
