Bitcoin pulls back from ATH – Will the Fed weigh on BTC further?

• Bitcoin falls from 108k to 104.5k.

• BTC pulls back as Polymarket BTC strategic reserve odds ease. 

• The Fed is expected to cut rates by 25 bps. 

• A more hawkish-sounding Fed could weigh on BTC near near-term. 

• Where next for BTC? 

After rising to an all-time high of 108K, Bitcoin is retreating as the odds ease with the Bitcoin Strategic Reserve. Attention is now on the Federal Reserve interest rate decision. 

Bitcoin is down 4% at the time of writing, trading at 104.5k—a 3.5k correction that could be considered healthy given the 14k rally over the past 7 days. According to Coinglass, Bitcoin’s market capitalization has eased to $2.06 trillion, and its dominance over altcoins is at 54%. 

The correction in Bitcoin has also sparked a selloff in altcoins. Ethereum is down 3% at 3880, XRP has dropped 4.5% and Solana is struggling at $216. Deeper losses can be seen in ADA, TRX, SHIB, TON, and XLM. The cumulative crypto market capitalization rose to almost $4 trillion yesterday but has since dropped $150 billion to just under $3.850 trillion today. 

BTC pulls back as BTC strategic reserve odds ease 

Optimism over a more crypto-friendly environment in Washington under Trump and hopes of a Bitcoin Strategic Reserve helped Bitcoin reach a record high of 108k. Recent price action has followed Polymarket odds of the US creating a BTC reserve. The odds surged from 25% to a high of 40% on Monday, corresponding to BTC’s jump from 94k to 108k. The odds have now eased to 38% as the Bitcoin price slips to 104k. 

The risk of a pullback was also there due to elevated profitability as tracked by the aSOPR. Historically, BTC hits a local top when the metric reaches the first or second band, as profitable holders cash out. Glassnode data showed the metric was close to the first band at the time of writing. 

How could the Fed rate decision impact Bitcoin? 

Attention is now turning to the Federal Reserve interest rate decision later today. The central bank is expected to cut interest rates by 25 basis points. This marks the second consecutive 25-basis-point rate cut after the Fed kicked off its rate cuts, like the 50 basis-point reduction in September.  

Given that the rate cut is priced in, the focus will be on the central bank’s communication and projections. Given signs of sticky inflation—CPI rose to 2.7% YoY in November, up from 2.6%—and the resilience of the US economy, the Fed could signal a pause to rate cuts for January and a slower pace of rate reductions in 2025. 

A lower interest rate environment is more beneficial for risk assets such as Bitcoin, owing to increased liquidity in the system. Therefore, a more hawkish-sounding Federal Reserve could put pressure on the Bitcoin price near term. 

Where next for Bitcoin? 

Bitcoin trades in a rising channel, forming a series of higher highs and higher lows. The price has eased away from the 108k ATH, but the uptrend remains convincingly intact.  

Buyers will look to extend gains towards 110k. Immediate support is at 104.4k, the December 5 high. A Break below here opens the door to the 100k psychological level. While a break below 95k could see sellers start to gain traction towards 90k. 

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