Bitcoin's Wild Ride Around FOMC: What to Expect This Time?

At the start of the week, Bitcoin (BTC) price succumbed to pressure from sellers, declining from $84,500 on March 17, to $81,300 at the time of writing. This downward movement was most likely a sell-off related to the Federal Open Market Committee’s (FOMC) two-day meeting, which takes place on March 18-19.

FOMC Meetings: A Catalyst for Market Volatility

Federal Open Market Committee (FOMC) meetings tend to act as market resets. Each time the FOMC meets to deliberate on US monetary policy, crypto markets brace for impact. Historically, traders de-risk and reduce leverage ahead of the announcement, and after the meeting and press conference from Federal Reserve Chair Jerome Powell, the markets can be equally reactive.

Key Upcoming Announcement

The press release of the current FOMC meeting is scheduled for Wednesday, March 19, at 2:30 pm ET, and it could trigger major movements in the Bitcoin market. Analyzing market behavior leading to its release could offer clues about Bitcoin’s next move.

To traders, FOMC means volatility. Traders are closely monitoring the FOMC minutes for any shifts in the Fed’s stance on inflation and interest rates. After the FOMC announcement, Bitcoin price tends to react sharply. Since early 2024, BTC prices have mostly declined after the FOMC decided to maintain rates.

Historical Reactions to FOMC Decisions

The notable exception was the pre-halving rally of February 2024, which coincided with the launch of the first spot BTC ETFs. When US interest rates were cut on September 18, 2024, and November 7, 2024, Bitcoin rallied. However, the third cut on December 18, 2024, did not yield the same result, marking a local Bitcoin price top at $108,000.

Unusual Market Behavior

A key indicator that provides insight into market sentiment is Bitcoin open interest—the total number of derivative contracts that have not been settled. Historically, Bitcoin open interest falls before FOMC meetings, but this month, despite a $12 billion open interest shakeout, there was no noticeable decrease in open interest leading up to the FOMC. This could indicate a strong directional bet.

This could also be a sign that traders feel less anxiety about the Fed’s decision, possibly expecting a neutral outcome. Supporting this view, CME Group’s FedWatch tool indicates a 99% probability that the Fed will maintain rates at 4.25%–4.50%.

Spot Bitcoin ETFs Response

Unlike Bitcoin whales, investors in the spot Bitcoin ETFs have historically offloaded BTC holdings before FOMC meetings. Since the spot BTC ETFs launched in January 2024, most FOMC events have coincided with ETF outflows. However, on March 17, the spot Bitcoin ETFs saw $275 million in net inflows, marking a shift from a month of outflows. This may signal a shift in investor sentiment regarding the Fed’s policy decisions.

If spot ETF inflows are rising before the FOMC, investors might be anticipating a more dovish stance from the Fed, such as signaling future rate cuts. Some institutional investors believe Bitcoin will perform well regardless of the Fed’s decision.

Anticipating Price Movements

Following the FOMC, BTC’s price action, along with on-chain data and spot ETF flows, will show whether the recent activity was part of a long-term accumulation trend or just speculative positioning. Many traders agree that BTC could experience a significant price movement after the FOMC announcement. As crypto trader Master of Crypto stated, “The FOMC is tomorrow, and a Big Move is expected.” Even without rate cuts, dovish statements could lift markets, while the absence of them could drive prices lower.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.