Is Bitcoin Price Set To Hit $40,000 After Fed Rate Announcement?

The price of Bitcoin (BTC) remained firm in the $34,000 territory. However, there were positive signs on the chain ahead of the Federal Open Market Committee (FOMC).

The US Federal Reserve is expected to announce another short-term interest rate cut. At the FOMC meeting on November 1. While markets may appear to value news, historical evidence shows that this can have long-term effects over time. Bitcoin prices.

The US economy is set to enter the longest rate hike since 2022.

The US economy has entered a “technical recession” as consumers grapple with double-digit inflation following a global pandemic, geopolitical tensions and a supply chain crisis.

In an unprecedented response to worsening inflation, the Fed has gradually raised the cash rate by 525 basis points over the 16 months from March 2022.

However, as the rate hit a 22-year high of 5.25%-5.5% in July, the Fed announced a pause at its September 20 meeting.

The Federal Open Market Committee (FOMC) is the body responsible for guiding monetary policy through open market operations. The 12-member group meets eight times a year to make key economic decisions, including interest rates.

How does the Fed rate affect the price of Bitcoin?

Like other risk assets, Fed rate announcements will affect Bitcoin prices based on changes in direction. Typically, during periods of high inflation, governments raise interest rates between March 2022 and September 2023 to improve excess money supply.

The rise in yields on government bonds also inadvertently reduces investors' appetite for riskier assets such as stocks and cryptocurrencies.

This event caused the price of BTC to drop 66% from $47,000 in March 2022 to December 2022.

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Meanwhile, as inflation eases, the Fed is expected to either adopt a neutral stance or reduce the funds rate. This is to prevent economic activity in the long run.

The resulting increase in money supply encourages investors to inadvertently risk capital into Bitcoin.

However, when he announced the end of inflation in September, Fed Chairman Jerome Powell pointed out that inflation was still too high. Therefore, strategic investors expect the US economy to be months away from outright deflation.

The latest consumer price index data and non-farm payrolls reports both came in above market consensus expectations. Along with the above evidence of economic growth, labor market growth suggests that the Fed will announce another rate cut on November 1.

The historical Fed rate trend chart above shows that a second consecutive rate hike would send the US economy into its longest rate hike since February 2022. This could have a long-term positive impact on the price of Bitcoin and other cryptocurrency assets.

Corporate bodies race to buy BTC ahead of upcoming Fed rates

Considering that the last rally sent the price of BTC up 30%, recent on-chain data suggests that corporate entities and high networth investors expect more profits.

Bitcoin has attracted a steady flow of interest from large institutional investors since the Fed's rate hike was announced on September 20, according to Sentiment Data. Interest in whaling has intensified over the past two weeks.

The chart below shows that Bitcoin has attracted at least 7,000 confirmed whale transactions in the last 10 days. This is on October 22.

In fact, the 17,520 large transactions recorded on October 24 were the highest since BlackRock announced its Spot BTC ETF application in June 2023.

The Well Transaction Count metric is the daily total of the number of unique transactions over $100,000. Intuitively, an increase in whale transactions is an indicator of high volume, indicating increased interest from corporate entities and high-net-worth investors.

In conclusion, drawing inferences from these historical data trends, if the expected price break is officially announced, the price of Bitcoin could rise another level towards $40,000.

BTC Price Prediction: Path to $40,000

With 79% of Bitcoin holders profitable, the overall sentiment in the ecosystem is predominantly positive. If the Fed Rate Pause announcement reinforces the momentum as expected, the BTC price may retest $40,000.

The on-chain representation of the historical buying trends of current BTC holders confirms this prediction with global in/out data. The resistance at $35,100 shows that it is the most important obstacle blocking the $40,000 territory.

As shown below, 3.16 million addresses bought 1.17 million BTC for a minimum of $35,137. If they close their position early, this will set up a quick recapture of the Bitcoin price.

But if the Fed's rate freeze encourages corporates to continue buying, Bitcoin's price rally could reach $40,000 as predicted.

Alternatively, if the price of BTC falls below the $30,000 mark, the bears can destroy that forecast. But as seen last week, the first wall of support around $33,500 looks scary.

The chart above shows that 1.06 million addresses currently have 513,580 BTC purchased at an average price of $33,650. If you keep HODLing, you will prevent a major Bitcoin price reversal.