Bitcoin Price Surge and Fed Decisions

Bitcoin surged to over $106,000 in early trading on Monday, setting a new all-time high before pulling back to $104,500. This price movement reflects both strong market sentiment and ongoing macroeconomic uncertainty ahead of the U.S. Federal Reserve’s highly anticipated interest rate decision this Wednesday.

Interest Rate Expectations

The Fed is widely expected to reduce the benchmark borrowing rate by 25 basis points, bringing it to the 4.25% to 4.5% range. This would mark a cumulative 100 basis points of easing since September, as the central bank prioritizes growth amid signs of a slowing economy. However, concerns remain over persistent inflation, highlighted by recent increases in both U.S. CPI and PPI data, suggesting price pressures may resurface in 2025.

The CME FedWatch tool currently assigns a 97% probability to a 25-basis-point rate cut at the Dec. 18 Federal Open Market Committee meeting. While lower interest rates typically encourage investment in risk assets like Bitcoin, analysts warn that the Fed’s commentary during Wednesday's meeting may temper expectations for further easing. Additionally, updated economic projections and a dot plot will provide fresh insights into policymakers’ outlook for 2025.

Inflation and Policy Speculation

Despite rate cut expectations, rising inflation concerns complicate the outlook. Recent U.S. CPI and PPI data have raised alarms about potential price pressures next year, particularly with speculation surrounding the economic policies of U.S. President-elect Donald Trump, who is set to take office in January 2025. Trump’s policies—including tariffs, immigration controls, and corporate tax cuts—could drive inflation higher.

ING Bank analysts suggest these developments may lead to a slower easing pace in 2025. They stated, "President-elect Trump’s policies will likely mean the Fed signals a shallower, slower path of easing."

While macroeconomic events remain important, QCP Capital analysts argue that Bitcoin’s recent rally has been primarily sentiment-driven. They noted that the upcoming U.S. Federal Reserve meeting might serve as background noise for Bitcoin, which is buoyed by institutional momentum and its growing status as a store of value. They added, "An extremely dovish Fed could still provide the push Bitcoin needs to climb even higher."

The BTC/Gold ratio reached an all-time high during the latest price surge, strengthening Bitcoin’s narrative as “digital gold.” Institutional interest has amplified Bitcoin's performance. For instance, MicroStrategy’s recent inclusion in the Nasdaq 100 index has enhanced positive sentiment. Executive Chairman Michael Saylor has hinted at more Bitcoin acquisitions, even with prices exceeding $100,000. Analysts believe this could lead to passive fund inflows into MicroStrategy shares, enabling easier fund-raising for Bitcoin.

As of the latest data, Bitcoin's price has risen by over 2% in the past 24 hours, trading at around $104,769 according to The Block's Price Page.