The price of Bitcoin fell below $104,000 for a number of reasons, including today’s interest rate decision by the Federal Reserve.
Bitcoin prices came under strong selling pressure during the Asian session, falling below $104,000 ahead of today’s Federal Reserve rate decision. The market’s base case is for a 25 basis point rate cut by the central bank, which could bring some optimism.
Notably, traders are remaining cautious before taking further action. Crypto billionaire Arthur Hayes predicted major turbulence in the Bitcoin and cryptocurrency markets during Donald Trump’s swearing-in ceremony on January 20.
Bitcoin price retreats ahead of Fed rate cut decision
Just hours before the Fed's rate cut decision was announced, Bitcoin prices encountered selling pressure and fell below $104,000. Bank of America executive Mark Cabana pointed out that the US central bank is likely to announce a 25 basis point rate cut due to concerns about maintaining tight monetary policy for too long. Although the labor market showed signs of easing, inflation remained firm, with the CPI in November surging to 2.8% from 2.4% in September.
While the market has digested the expectation of a 25 basis point rate cut, analysts are still curious about the comments of Fed Chairman Powell on monetary policy in 2025. Against the backdrop of continued rising inflation, the Fed may reduce the number of rate cuts in 2025 from the previously expected four to three. This suggests that the US central bank will turn hawkish again to keep inflation below its desired 2% target. Kurt S Altrichter, founder of Ivory Hill Wealth, pointed out:
"Tomorrow's Fed meeting is not just about expected rate cuts, but about the Fed's commitment to rate cuts through 2025. More rate cuts = better for stocks and bonds. Fewer rate cuts = market adjustment of expectations."
On-chain data points to a sell-off
Amid this uncertainty, short-term holders have chosen to take profits en masse in recent sessions. On-chain analytics platform Santiment reports that BTC holders who have held the asset for 90 to 365 days have cashed in profits above $100,000.
In contrast, long-term holders who were active in the $90,000 to $100,000 price range saw a noticeable drop in activity once prices passed $100,000.
Bitcoin price could retrace this week
If history repeats itself, Bitcoin price could see some retracement this week. As BTC enters its 7th week of price discovery, popular cryptocurrency analyst Rekt Capital expects a pullback ahead. The analyst highlighted data from previous cycles, stating:
In 2013, Bitcoin experienced a pullback during the 7th week of price discovery.
In 2017, the cryptocurrency retraced 34% in week 8.
In the sixth week of 2021, Bitcoin fell 16%.
Therefore, if BTC repeats history, we can expect a similar pullback and the Bitcoin price could also fall below $100,000. Rekt Capital warns that such adjustments are a normal part of Bitcoin cycles and have historically wiped out weeks of gains in a short period of time.
BitMEX co-founder Arthur Hayes predicted a market correction, predicting a sharp drop around January 20, the day of President Donald Trump’s inauguration. Hayes added that his Maelstrom Investment Fund plans to reduce certain positions ahead of the expected market turmoil.
Traders are liquidating and investors may not sell their holdings as top analysts including Peter Brandt predict Bitcoin price will reach $125,000.
At press time, BTC price fell 2.5% to $103,820, with daily trading volume down 10%. Coinglass liquidation data also shows that BTC liquidations in the past 24 hours amounted to $71 million, of which long liquidations amounted to $48 million.