Investors brace as Bitcoin teeters ahead of Fed reckoning

Bitcoin briefly dropped below $116,000 in early September 2025 amid mixed signals from on-chain metrics and market uncertainty ahead of the Federal Reserve’s policy decision. The price had previously surged above the critical $116,000 level, marking a three-week high, but traders remained cautious as they braced for potential volatility following the central bank’s decision. The market had priced in a 95% probability of a 25-basis-point rate cut, a move that historically supports risky assets like Bitcoin.

On-chain data revealed diverging signals ahead of the Fed’s announcement. Large deposits into exchanges had fallen to a 7-day moving average of 25,000 BTC, significantly lower than the 51,000 BTC seen in July when Bitcoin was trading near $120,000. Additionally, the average deposit size on exchanges had decreased from 1.14 BTC to 0.57 BTC, indicating reduced selling pressure. Despite this, USDT inflows into exchanges reached $379 million by late August—the highest level of the year—suggesting investors were positioning for potential market shifts.

Volatility remained subdued ahead of the Fed’s decision, with Bitcoin’s 7-day volatility dipping below 0.7%, a level typically seen during brief market pauses. This low volatility raised speculation that a sharp price movement, either upward or downward, could follow once the Fed’s decision was announced. Some analysts highlighted the risk of a "sell-the-news" event, where the price could pull back after breaking through key levels.

Technical analysis showed Bitcoin forming a rising wedge pattern on the weekly chart, a bearish signal if the trend continued. Additionally, the RSI and MACD indicators showed bearish divergence, with the RSI reading at 59 and the MACD in a bullish crossover since mid-September. If Bitcoin failed to maintain support around $116,000, a correction to $107,245 was deemed possible. Conversely, a successful breakout above $116,000 could push the price toward the $120,000 psychological level.

The market also faced broader macroeconomic risks. Some analysts warned that a Fed rate cut perceived as politically motivated could trigger instability in financial markets, including the dollar and bond markets. Additionally, the market had already priced in most of the expected rate cuts for 2025 and 2026, raising concerns that further price gains could be limited until new catalysts emerged. Despite these risks, long-term bullish views remained, with some analysts citing historical patterns and macroeconomic tailwinds, such as dollar weakness and whale accumulation, as potential drivers for a rebound.

Bitcoin ETFs continued to see strong inflows, with spot Bitcoin ETFs adding $2.68 billion in assets over six consecutive days, bringing cumulative inflows to $57 billion. This trend, combined with institutional accumulation by large holders, suggested underlying confidence in Bitcoin’s long-term trajectory. However, the market’s seasonal weakness in September—historically one of Bitcoin’s worst months—added to near-term uncertainty.