Federal Reserve Rate Decision May Impact Bitcoin's Short-Term Trajectory

On May 7th, the Federal Reserve is set to announce its latest interest rate decision at 2 p.m. ET. Market expectations are leaning heavily towards the Fed maintaining the current rate at 4.25%-4.50%, with a probability of 97.2%. However, the post-meeting remarks by Federal Reserve Chairman Jerome Powell are anticipated to be a pivotal factor in determining Bitcoin's short-term trajectory.

If the Federal Reserve decides to keep the interest rate unchanged, Bitcoin may experience short-term pullback pressure. The market has already partially factored in this expectation, with technical indicators showing strong support for BTC around $95,000. While a slight correction is needed on the 4-hour chart, the daily chart remains above the MA7, indicating a robust market posture. Should Powell adopt a dovish stance, hinting at a potential rate cut in June, and coupled with expectations of liquidity injection from the U.S. Treasury, Bitcoin could break through the $97,000 resistance level and surge towards $100,000. In an extreme scenario, an unexpected rate cut could lead to the liquidation of short positions worth $3 billion, triggering a significant short squeeze.

In the Bitcoin options market, there has been a notable increase in open positions for $300,000 call options, reflecting bullish sentiment and expectations of a price breakout. On-chain data also supports this optimistic outlook, with the MVRV indicator returning to a healthy range. Additionally, there has been a significant increase in active addresses and whale transaction volumes, suggesting that large holders are actively accumulating Bitcoin.

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