Here’s why Bitcoin price is going up 5% ahead of Federal Reserve decision

With the Fed decision on the horizon, Bitcoin is gearing up for what looks like a potential rally if traders’ expectations are met. So far the asset has been hiking up near the $118,000 mark. Will it go any higher?

Bitcoin and market traders are expecting the Federal Reserve to cut interest rated by a quarter-point, or 25 basis point reduction from the current target range of 4.25% to 4.5%. The easing of monetary policy could see the dollar weakening and alternative assets picking up speed for a rally.

Reuters reported that the dollar has fallen to a four-year low, just a day prior to the Federal Reserve interest rate cut that’s set to be announced on September 17 at 2 pm local time.

A weakening dollar is a good sign for riskier assets that are viewed as a safe haven against inflation, such as gold and cryptocurrency. Bitcoin in particular has been on an upward trend in the days leading up to the Fed decision.

The crypto market itself has been anticipating a Fed rate cut since the beginning of the week, with Bitcoin (BTC) surging by more than 5% in the past seven days. Even a day prior to the decision, the overall crypto market cap surged past the $4 trillion psychological barrier. It now stands at $4.16 trillion as more liquidity flows into the markets.

Most recently, BitMine Chairman Tom Lee predicted Bitcoin and Ethereum would see a “monster move” that will catapult the price to new heights if the Fed follows through with its rate cut. The financial analyst expects a three-month rally for BTC following the Fed rate cut hype.

How is Bitcoin doing ahead of the Fed decision?

At press time, Bitcoin is trading at $117,319, rising by 1.23%. The asset is showing resilience as markets await the Federal Reserve’s highly anticipated rate decision. BTC managed to rebound from the $116,200 to $116,300 support zone, followed by a sharp push past $117,200, suggesting that buyers are stepping in aggressively ahead of the announcement.

The timing aligns with increased speculation that the Fed may deliver a 25 basis point cut, sparking optimism for traders. This “buy the rumor” momentum has historically lifted Bitcoin up ahead of dovish monetary policy moves. A similar pattern occurred back in December 2024 when the Fed cut interest rates by 25 basis points and sent the crypto market into a flurry.

With the Relative Strength Index sitting at 71.99, it shows that Bitcoin briefly entered overbought territory, reflecting strong bullish sentiment. However, the indicator has cooled off a bit, hinting at the possibility of short-term consolidation.

Despite this, the RSI trend still supports upward momentum, showing that buyers maintain control of the market. If the Fed confirms a cut at 25 basis points, Bitcoin could surge even higher as traders price in easier liquidity conditions.

If the Fed signals a more aggressive easing cycle, BTC could retest higher resistance levels even surpassing beyond $118,000, while a more hawkish tone could see it retracing its steps back toward the $116,500 to $116,700 range.