Regulators and Rates Collide as Bitcoin Tests $118K Threshold

Bitcoin held above $116,000 on Wednesday as traders anticipated potential U.S. Federal Reserve rate cuts following the FOMC meeting. Market participants closely monitored the price action as Bitcoin edged toward a four-week high, driven by expectations of volatility surrounding the central bank’s monetary policy decisions. The CME Group’s FedWatch tool indicated a 96% chance of a 25 basis point rate cut and a 4% chance of a 50 basis point cut during the FOMC meeting. Polymarket traders also reflected similar expectations, with a 93% probability assigned to a 25 basis point cut and a 5% chance for a 50 basis point reduction. These probabilities reinforced a growing consensus for a gradual reduction in interest rates by the end of the year.

Traders and analysts focused on Federal Reserve Chair Jerome Powell’s post-meeting press conference, where his language and tone were expected to provide further clues about the trajectory of interest rate adjustments. Powell had previously indicated that the current inflation and labor market conditions could warrant cuts, particularly amid pressure from President Donald Trump. Observers emphasized that any significant price movement resulting from the FOMC decision was likely already factored into market pricing. Swissblock, a private wealth management firm, noted that Bitcoin’s Risk Index would be a key indicator in determining whether the asset’s bullish momentum continued or if a potential sell-off loomed.

Technical analysis suggested that Bitcoin faced a critical resistance level around $118,000. Analysts like AlphaBTC highlighted the potential for BTC to test this level before any retracement following the FOMC outcome. If Bitcoin broke above $118,000 and maintained a hold, it could signal the start of a new upward trend toward all-time highs. Crypto analyst Jelle emphasized the importance of holding above $118,000, noting that a breakout could lead to a price discovery phase near $120,000 and eventually to the record high of $124,500. Conversely, a failure to maintain a hold above $116,800 could trigger a retest of the $112,000 level, which aligns with the 100-day simple moving average.

The broader cryptocurrency regulatory landscape also gained attention, with reports of growing collaboration between the United States and the United Kingdom on digital asset regulations. During a meeting between UK Chancellor Rachel Reeves and U.S. Treasury Secretary Scott Bessent, discussions centered on regulatory alignment, particularly for stablecoins and blockchain-based financial services. The initiative aimed to create a more favorable environment for British and U.S. firms to operate across both markets. This cooperation is part of a larger effort to position the UK as a competitive hub for digital assets, with officials expressing concern over British companies lagging behind U.S. counterparts in the crypto space.

Industry participants, including firms like Coinbase and Circle, welcomed the prospect of a shared regulatory framework, emphasizing that clarity and alignment could reduce operational uncertainty and attract investment. The proposed joint U.S.-UK digital sandbox initiative, similar to suggestions made by SEC Commissioner Hester Peirce, aims to allow firms to test innovative financial services in a controlled regulatory environment. This approach could facilitate the development of a more coherent and scalable digital assets ecosystem, with potential ripple effects on global regulatory standards.

The convergence of U.S. and UK policy efforts, alongside the anticipation of rate cuts, highlights the evolving interplay between macroeconomic policy and cryptocurrency markets. As Bitcoin continues to test key resistance levels and navigate regulatory developments, the coming weeks will likely provide further insight into the direction of both the asset and the broader financial landscape.