A look at how the Fed’s next steps can affect Bitcoin’s price

Key Takeaways

How are traders positioned ahead of the Fed rate decision?

Market consensus suggests another 0.25% rate cut is likely, but traders have been cautious. 

Which key targets are Options traders eyeing?

They expect BTC to secure $100k as support, with $120k as the upside target. 

After staying below $110k over the weekend, Bitcoin [BTC] jumped to $111k on 20 October. The recovery followed reports that the U.S and China were ready to engage to resolve tariff frictions linked to rare earth minerals.

The update boosted risk assets, including BTC. S&P Futures soared while gold extended its explosive run to $4,278. This raises the question – Will the macro backdrop drive Bitcoin’s recovery higher?

Traders are cautious ahead of Fed decision

The U.S.-China tariff update remains a key factor for BTC’s price direction in the near term. At the same time, the Fed rate cut expectations could also influence the market.

As of writing, the consensus leaned (98% chance) towards another 25 basis point cut in the upcoming meeting on 29 October. 

Source: Fed Watch Tool

Historically, cheaper capital or loans linked to rate cuts have fueled bullish sentiments and risk assets. Despite the Fed flying blind with key macro prints out of reach due to the government shutdown, the market has been confident of another rate cut next week. 

Collectively, the macro landscape could improve for the better and reignite Q4’s bullish hopes. Joshua Deuk, Head of Trading at Mozaik Capital, echoed the same and noted, 

“We’re still heading toward easing (eventually), and the Fed has ammunition. So, unless China drops a nuke on the U.S. (very unlikely), mid-term bias is still up.”

Key levels to watch for BTC

On the technical charts, Bitget CEO, Gracy Chen, said that the recent flash crash dented market sentiment. However, she highlighted the $100k-level or the 360-day Moving Average (MA) as a key support to reinforce the bullish structure if defended. 

“If $BTC manages to break through its ATH, there’s still room for upside into Q1 next year. If not, and it fails key support levels (around $110K/180MA or $100K/360MA), I may take profit based on technical signals.”

Source: X/Gracy Chen 

Such uncertainty was also present in the Options market.

Amberdata’s 25-Risk Reversal (25RR) was negative for next week’s expiries at press time, underscoring high hedging activity or demand for put Options (bearish bets).  

However, Options traders may be expecting $100k as a price floor and $120k as a potential upside target in Q4. 

Source: Velo