Bitcoin's fate now hinges on the Fed's next move

Bitcoin's price has recently experienced volatility amid shifting macroeconomic conditions in the United States, with a significant downward revision in the labor market data sparking speculation about the Federal Reserve's next policy move. The Bureau of Labor Statistics (BLS) reported a sharp decline in the number of jobs added in August 2025, with only 22,000 new jobs created—well below the 75,000 forecast. The unemployment rate also climbed to 4.3%, marking the highest level since late 2021. These figures, combined with a 911,000 job revision in the previous year, indicate a weakening labor market that could prompt the Fed to cut interest rates. As of the latest CME FedWatch data, the probability of a 25 basis point rate cut in September has surged to 92%, with some market participants positioning for a 50 basis point reduction.

The economic backdrop has had immediate implications for Bitcoin, which has shown both signs of resilience and fragility. After bouncing from a key support level near $110,000, Bitcoin has tested resistance at $116,000, a level that could determine whether it regains momentum or slips further into a correction. On the daily chart, BTC has broken below an ascending channel but found support near the $110,000 region, aligning with the 100-day moving average. The RSI remains at around 44, indicating weak but not oversold momentum. Meanwhile, the 4-hour chart shows Bitcoin retesting the $110,000–$111,000 pivot zone, with market indecision evident as the RSI hovers near 49.

On-chain data also offers insight into the evolving dynamics of the Bitcoin market. Exchange reserves, a critical metric for tracking long-term accumulation, have dropped to multi-year lows. This decline indicates that a growing portion of Bitcoin is being held in cold storage, reducing the short-term sell-side pressure. Historically, such drawdowns in exchange reserves have coincided with bullish reversals, suggesting that despite the recent price volatility, long-term investor conviction remains strong. Additionally, Bitcoin’s open interest and stablecoin inflows have shown signs of rising, indicating increased speculative activity.

The broader financial markets are also reacting to the weak jobs data and shifting rate expectations. Gold and Bitcoin both experienced initial gains following the release of the data, with gold briefly surging past $3,700 before retreating. Similarly, Bitcoin briefly rose above $113,000 but pulled back to around $111,600 at press time. The VIX index, a key barometer of market volatility, has also shown increased divergence between its short- and long-term futures contracts. October VIX futures trade at a significant premium to the September contract, indicating that traders are anticipating heightened volatility after the Fed’s rate decision is priced in.

Analysts have drawn parallels between the current economic environment and past periods of Fed-driven easing cycles, such as the 1990–1991 recession. During that time, the Fed cut interest rates aggressively despite high inflation and rising unemployment, ultimately setting the stage for a stock market rebound of over 30%. If the Fed adopts a similar approach in 2025, it could create favorable conditions for Bitcoin, historically a strong beneficiary of lower interest rates and increased liquidity. However, the impact of any rate cut will depend heavily on the broader economic context. If the U.S. enters a recession or experiences rapid economic deterioration, liquidity could dry up, and Bitcoin may struggle to maintain its upward momentum.

Looking ahead, the technical outlook for Bitcoin remains mixed. While it holds key support near $110,000, a breakdown below this level could extend the decline toward $104,000, a historically significant demand zone. Conversely, a successful defense of the $110,000 level could set the stage for a push toward $116,000 and beyond. Institutional adoption and regulatory clarity have also introduced new dynamics into the market, potentially amplifying the effects of liquidity-driven cycles. With the Fed poised to act, the coming weeks could be pivotal in determining whether Bitcoin enters a new bull phase or faces further consolidation.