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Bitcoin Takes a Breather After Doji Candle in a Cautious Pre-Fed De-Risking
Despite the expected hawkish stance from the Fed, the path of least resistance for risk assets remains tilted toward the upside, suggesting that the overall outlook for Bitcoin and other risk assets remains positive.
The expected rate cut and dot plot projections suggest that the Fed is likely to signal a more hawkish stance, with fewer rate cuts expected in 2025. However, this does not necessarily mean tightening, as easing is still on the table.
The consensus is that the Fed will cut rates by 25 basis points to the 4.25% to 4.5% range, but the dot plot is expected to show fewer rate cuts for next year. Analysts at ING expect the Fed to signal only three rate cuts in 2025, with a terminal rate of around 3.75% in the third quarter.
Alternative cryptocurrencies are experiencing even larger losses than Bitcoin, but some majors like XRP, SOL, and ETH are experiencing losses comparable to BTC.
Bitcoin is experiencing selling pressure and a 2% drop in price, trading around $103,750, after a Doji candle on Tuesday indicated indecision and potential bullish exhaustion. This is likely due to traders de-risking in anticipation of an expected hawkish Fed rate cut later Wednesday.
Bitcoin (BTC) is taking a breather, experiencing selling pressure after Tuesday's indecisive price action marked by a Doji candle. This seems to be a classic case of traders de-risking in anticipation of an expected hawkish Fed rate cut later Wednesday.
The leading cryptocurrency by market value traded around $103,750, marking a 2% drop for the day, according to TradingView and CoinDesk data. Prices had surged to a record high of over $108,000 on Tuesday but failed to maintain those gains, ending the UTC day flat. That formed a 'doji,' a candlestick pattern that signifies indecision and potential bullish exhaustion when seen at record highs.
As expected, bitcoin's decline has resulted in even larger losses for alternative cryptocurrencies, but some majors, such as XRP, SOL, and ETH, are experiencing losses comparable to BTC.
The Fed will announce the rate decision, the interest rate dot plot, projections, and economic forecasts at 14:00 ET. Fed Chair Jerome Powell's press conference will be held a half hour later.
The consensus is that the Fed will cut rates by 25 basis points to the 4.25% to 4.5% range, marking a total easing of 100 basis points since September. But, the dot plot is expected to show fewer rate cuts for next year.
"The risk of slightly stronger near-term growth with the threat of higher inflation – tariffs putting up prices of goods and immigration controls potentially lifting wages and costs in the likes of agriculture, construction and hospitality sectors – means that we expect them to signal only three rate cuts in 2025. Previously, they had suggested four," analysts at ING said in a note to clients.
"We look for 25bp of cuts per quarter in 2025 with a terminal rate of around 3.75% in the third quarter," analysts added, noting the possibility of the Fed revising their projections for economic growth and inflation.
These so-called hawkish expectations are likely fueling the de-risking in the crypto market that is looking for reasons to correct, having seen prices for BTC soar from $70,000 to over $100,000 in less than two months.
It's important to note that fewer rate cuts do not necessarily mean tightening; easing is still on the table. This suggests that the path of least resistance for risk assets remains tilted toward the upside.