Bitcoin [BTC] traders found themselves in a nail-biting situation this week following its decline over the past seven days. The bearish effect sent BTC down and at press time, the crypto king was standing in a critical zone on short-term support. Its direction from this point was at the mercy of the FOMC meeting.
Bitcoin remained at its short-term support at $19,004 at press time. However, its performance over the next 24 hours will change drastically depending on the outcome of the FOMC meeting. The latter is expected to include a review of the US Federal Funds rate. This will affect investor sentiment as it has in the past.
Current projections favor an increase of 0.5% or 0.75%. The latter would trigger stronger bullish sentiment for BTC, while the former would support a range-bound performance. This was the case according to chart which provides a guide or estimates the potential outcome based on federal rate data.
While current sentiment has been overwhelmingly in favor of a rate of 0.5% to 0.75%, a 1% rate hike could still be possible. A rate of 1% is expected to trigger bearish sentiment. However, the resulting downside could push BTC towards the $17,600 price range.
Furthermore, on-chain metrics highlighted uncertainty as investors await a critical FOMC decision. Dormant metrics have shown that dormancy has dropped significantly over the last 30 days. At press time, it was near its monthly lows, which is not surprising as investors wait to see how the market reacts.
The stillness reflected whale activity, especially from the middle of the month. Addresses holding more than 1,000 BTC have been significantly reduced since September 15th. However, outflows from these addresses have also decreased since September 18. This outcome reflects the uncertainty surrounding the FOMC meeting and the impact of the announced rate.
Loading the gun
The possible outcome could be another sharp rise or a slight decline. Addresses that have already sold will most likely take advantage and start piling up, especially if there is an additional shortage. This outcome could potentially ensure a softer landing and therefore limited downside.
On the other hand, a favorable FOMC outcome could trigger a strong buying signal, especially from whales. Such an outcome could support a strong recovery at the end of the week.
Therefore, the outcome of the FOMC meeting will give a rough idea of how the Federal Reserve has been doing in terms of fighting inflation. A positive outcome could ease selling pressure on Bitcoin and the riskier asset class in general.