Bitcoin surged past $112,000 on Monday, in its strongest rally for weeks as traders responded to rising expectations that the U.S. Federal Reserve will cut interest rates (market odds are now 98%). The surge signaled renewed bullish momentum for cryptocurrency markets after weeks of consolidation between $105,000 to $108,000 levels.
Fed Policy Expectations Stimulate Crypto Market Rally
Bitcoin experienced an abrupt surge after CME FedWatch Tool predicted a 98.3% probability of rate reduction at the Federal Reserve’s next meeting. Investors anticipate that cooling inflation data and diminishing job growth may prompt central banks to ease policy for the first time this year, prompting Bitcoin’s dramatic price change.
Markets have long awaited this signal from central bankers to buy risk assets – with Bitcoin leading the charge. A near-certain rate cut is being seen as a green light for risk assets like Bitcoin.
Lower interest rates typically weaken the U.S. dollar and make alternative assets like Bitcoin more appealing to investors, and have historically proven particularly robust during periods of monetary easing.
Technical Breakout of Items Over $112K
Bitcoin prices experienced an exponential surge over the course of 24 hours, reaching its highest point since early September at over $112,450 briefly. Trading volumes skyrocketed on major exchanges while open interest in futures contracts reached three month highs.
Technical analysts believe Bitcoin’s breakthrough of the psychological $110K barrier could spark additional gains if buying pressure remains strong. A trader at a digital asset fund observed, “This is a classic breakout structure.” If BTC closes above $112K on its daily chart, its next resistance level could be around $118K with $120K serving as its major psychological goal.
Fear and Greed Index for crypto has also seen an upward shift, from neutral to greed, signalling increased market confidence.
Institutional Momentum Builds.
Institutional investors are also contributing to Bitcoin’s surge in value. U.S. spot Bitcoin ETFs recorded their largest net inflows ever seen since over a month, signalling renewed trust from traditional investors. Analysts suggest that rate cuts may boost ETF demand from funds seeking protection against inflation or dollar weakness.
BlackRock and Fidelity, two major asset managers, have witnessed increased volumes for their Bitcoin products since last week’s inflation data revealed a slowdown in core CPI inflation.
Macro Tailwinds for Crypto
As well as Fed expectations, wider macroeconomic conditions are also encouraging Bitcoin adoption. A softening U.S. labor market, low inflation rates and geopolitical instability have all caused investors to seek alternative stores of value over hard assets like real estate.
“Should the Federal Reserve reduce rates, it could create a multi-month bull cycle in Bitcoin,” according to one macro strategist. Liquidity conditions have improved and traders have begun positioning for that outcome of their decision.
What’s Next for Bitcoin
Market observers are closely watching $112K-$114K as an important trading zone. A break out could see BTC reach new record highs before year end; conversely a pullback could see prices return toward support levels at $108K.
As Fed odds appear to have become certain, market volatility may rise ahead of an FOMC meeting whose decision could radically transform global risk landscape.
Bitcoin’s breakout above $112K illustrates that central bank policy and macroeconomic sentiment remain major forces driving crypto markets.
