Bitcoin Drops 3% as Fed Rate Decision Looms, Investors Await

Bitcoin (BTC) has experienced a significant decline, dropping over 3% during the ongoing session and struggling to maintain its position above $81,000. This downturn comes after the cryptocurrency failed to surpass the 200-day Simple Moving Average (SMA) and the resistance zone between $84,000 and $85,000. Technical indicators suggest a bearish pivot, with BTC trading below the 200-day SMA since the beginning of last week.

Investors are closely watching the Federal Reserve's upcoming decision on interest rates, which is expected to influence market sentiment. The past 24 hours have seen a notable decrease in BTC trading volume, with $22 billion changing hands compared to $49 billion a week prior. President Donald Trump has called for immediate interest rate drops, but the Federal Reserve has been cautious in its approach.

Market analysts predict that if the Fed signals future rate cuts, it could boost risk appetite and potentially spark a short-term rally in crypto markets. However, a hawkish stance from the Fed could reinforce tighter financial conditions and lead to a market dip. Despite the potential volatility, Bitcoin's growing resilience and pro-crypto policy tailwinds may mitigate the broader market impact.

Spot Bitcoin ETFs saw substantial inflows on Monday, with a total of $275 million in investments. This influx indicates a resurgence of investor confidence in the flagship asset. Fidelity’s FBTC led the inflows with $127 million, followed by Ark 21Shares’ ARKB with $88.5 million. BlackRock’s IBIT and Grayscale’s GBTC also saw notable inflows, contributing to the overall increase in net assets.

CryptoQuant CEO Ki Young Ju has warned that the Bitcoin bull cycle may have ended, predicting a period of sideways or bearish movement for the next 6-12 months. This shift in outlook is based on on-chain metrics and indicators, which suggest bear market conditions. Ju highlighted the drying up of fresh liquidity and the selling of BTC by whales at lower prices as key factors contributing to the bearish sentiment.

Bitcoin's price action has been volatile, with the cryptocurrency struggling to break out of its current range between $81,000 and $84,000. Analysts have noted similarities between the current price action and the market conditions in June 2021, when BTC ultimately broke out of its range to hit an all-time high in November. However, the current downward trend channel signals consistent selling pressure, with support at $80,000 and resistance around $92,000.

Despite the recent volatility, the long-term trend for Bitcoin remains bullish. Buyers must push BTC past the 200-day SMA and $85,000 to prevent a bearish outlook. The market is currently in a holding pattern, with investors awaiting the Federal Reserve's decision on interest rates, which could significantly impact market sentiment and Bitcoin's price trajectory.