Where next for Bitcoin: US elections and the upcoming Fed rate decision to drive BTC
|This week is undoubtedly one of the most crucial weeks for the crypto market in a long time, with both the US election and the Fed rate decision in focus.
US election speculation
Speculation of a Trump victory in today's US election spurred Bitcoin to within touching distance of its all-time high last week before slight changes in the polls triggered sharp declines.
Bitcoin rose to 73,500 last Thursday as pro-crypto candidate Trump enjoyed a strong lead in the prediction market. However, a change over the weekend, which saw Kamala Harris gain ground in the polls, take the lead in Iowa, a traditionally red-leaning state, and lead in the Predictit betting market, has resulted in investors reassessing the likelihood of a Trump victory, pulling Bitcoin back briefly below 67k.
As Americans head to the polls today, Trump is still ahead on the Polymarket, but the other polls and prediction markets show Trump and Harris to be neck and neck, meaning that the outcome could be a coin toss.
Trump vs Harris
A win by pro-crypto candidate Trump and a Republican Congress (red sweep) could boost Bitcoin. Meanwhile, a Kamala Harris win and a blue sweep could see a further unwinding of the Trump trade and more losses for Bitcoin, at least in the near term. However, the longer-term outlook for Bitcoin remains constructive amid global central banks easing, owing to where Bitcoin is in its 4-year cycle and amid expectations of the national deficit surging under either Trump or Harris.
Should the election result in gridlock in Washington, this could favour Bitcoin bulls as the Federal Reserve gradually cuts rates, raising liquidity. However, a delay in announcing the final result could hurt risk sentiment and fuel volatility across risk assets, including cryptocurrencies.
FOMC rate decision
As well as the election this week also sees the Federal Reserve interest rate decision this week. The Fed is widely expected to cut interest rates by a further 25 basis points. The move comes after the central bank cut interest rates by 50 basis points in September and sets the stage for a recovery in risk assets such as crypto.
Given that the rate cut is almost fully priced in, attention will be on what comes next as inflation in the US has eased to 2.1%, just above the Fed's 2% target, while the latest nonfarm payroll report pointed to a gradual easing in the U.S. jobs market, supporting further cuts in 2025.
Fear and greed
Despite bitcoin's recent drop and rising volatility ahead of the uncertain elections, sentiment towards crypto remains positive. The fear and greed index is at 74, showing the market is in a state of greed, which often spurs buying activity and has previously led to price gains.
Bitcoin forecast – technical analysis
Bitcoin reached a peak of 73.5k before correcting lower. The price is testing support of the upper band of the 7-month descending channel.
Should buyers defend the trendline support, bulls will look to push Bitcoin back up to 70k and 73,750 and fresh all-time highs.
However, a break below the channel's upper band and the 66k -65k support zone, the September and August high, exposes the 200 SMA at 63,500.
Should sellers take out the 200 SMA, this opens the door to 60k, the October low and psychological level.
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