Bitcoin Rally Faces Risks Ahead of January FOMC Meeting
A recent report by digital assets research firm 10x Research indicates that the US Federal Reserve's stance on interest rate cuts is a significant challenge for the current Bitcoin (BTC) rally.
Bitcoin’s Rally at Risk Ahead of FOMC Meeting
Following pro-crypto Republican candidate Donald Trump's election victory in November, Bitcoin rose approximately 47%, increasing from around $67,500 on November 4 to about $99,700 as of January 6.
Further gains are expected during the "Trump rally" leading up to the January 20 inauguration. However, momentum may stall ahead of the Federal Open Market Committee (FOMC) meeting later in January, according to 10x Research’s Markus Thielen. He predicts a positive start for BTC in January, followed by a potential dip before the Consumer Price Index (CPI) inflation data release on January 15. A favorable CPI report could boost optimism and fuel another rally before Trump’s inauguration. Nonetheless, Thielen warns that bullish momentum may decline ahead of the FOMC meeting on January 29.
Data from CME Group’s FedWatch tool indicates a 90.9% probability that interest rates will remain unchanged between 425 and 450 basis points following the upcoming FOMC meeting.
Bitcoin experienced a 15% decline to $92,900 after the December 18 FOMC meeting, highlighting the Fed’s influence. This drop occurred after the Fed announced two rate cuts for 2025 instead of the anticipated five, which supports Thielen’s assertion that the Fed’s decisions pose a primary risk to BTC's bullish trajectory. Thielen remarked:
We anticipate lower inflation this year, though it may take time for the Federal Reserve to formally recognize and respond to this shift.
Thielen also noted that institutional participation is crucial for Bitcoin's short-term price movements, with stablecoin minting rates and crypto exchange-traded fund (ETF) inflows serving as indicators of institutional interest.
Institutional Interest in Bitcoin Grows
Despite significant outflows from US spot Bitcoin ETFs at the end of December, new inflows have renewed optimism regarding institutional interest in Bitcoin. Data from SoSoValue shows that spot Bitcoin ETFs received $908 million in inflows on January 3.
Major BTC mining firms such as MARA and Hut 8 are increasing their BTC reserves. Additionally, technology firms like Canada-based video-sharing platform Rumble have introduced a $20 million BTC treasury strategy.
A separate report from cryptocurrency exchange Bitfinex predicts that Bitcoin could rise to $200,000 by mid-2025, despite minor price pullbacks. At press time, BTC trades at $101,555, reflecting a 3.7% increase in the last 24 hours.
